Save content
Have you found this content useful? Use the button above to save it to your profile.
money jar with currency and topped with bow
istock_catlane_ga

Sage self assessment summit: Part 7 – Gift Aid

by
20th Jan 2017
Save content
Have you found this content useful? Use the button above to save it to your profile.

Topic seven in our series of self assessment articles examines some of the points practitioners should be aware of when dealing with clients’ Gift Aid claims.

Serialised in eight parts, the Sage self assessment summit webinar features tax experts Rebecca Benneyworth and Paula Tallon outlining the main issues of the upcoming self assessment season, why they’re important and how to tackle them.

To watch the full webinar, including additional audience questions, click on this link and register absolutely free.

Topic 7 of 8: Gift Aid

Gift Aid claims are a common issue for practitioners up and down the land.

Currently one of the useful aspects of Gift Aid is that it is now the only technique that can still reduce tax for 2015/16, right up until the date the return is submitted, provided it isn’t submitted late. This late submission is something accountants need to watch out for with clients who are relaxed about the £100 fine – they then lose the option of carrying back Gift Aid payments from the current year into 2015/16.

Accountants need to pay particular attention to clients whose total income is between £100,000 and £121,200. These clients are paying an effective rate of 60%, because their personal allowance is being tapered. It may be that they did (or they have) given regularly to charity, and so could carry back the Gift Aid payment.

Practitioners may even choose to pause after completing their clients’ tax return and ask them: “if you wanted to make any donations to charity, then now is a really good time to do it. We’ll hold the tax return until you’ve made that payment, evidence the payment and then put it on the tax return getting yourself a nice bit of tax relief.”

According to accountant and tax lecturer Rebecca Benneyworth, this is a good way to give money to charity, but do so in a very tax efficient way.

It is also worth considering how Gift Aid payments are identified. In the past it was donations to charity under deed of covenant, which had a degree of formality about it. Practitioners should consider how they are collecting data about Gift Aid payments. If a client gets signed up in the street by charity collectors, is that monthly payment from their bank set up on a business account their accountant can see, or a private account they can’t (and the client has forgotten to mention it)?

Another point to ponder is when a client takes a bag of clothes down to their local charity shop and ticks the Gift Aid box. They then start getting emails when their goods have sold stating the value of the donation. Clients may not be tuned in to giving this information to their accountant, and higher rate taxpayers may miss out on additional tax relief.

Practitioners are also warned to pay extra attention to the non-tax payer, particularly in the coming year, due to the changes in the taxation of interest. There are people who no longer have a tax liability, and they must now tell charities they make donations to that they are no longer a taxpayer and withdraw their Gift Aid statement. Otherwise they’re going to have a tax bill. This cannot be done retrospectively because the charity may have already claimed the tax relief.

A warning story from Rebecca Benneyworth:

“I spoke to a chap a few years ago. He’d given up a big career in London and decided to go into the ministry. As a result while he trained he had no income at all, but he decided to give a quarter of his wealth to charity. So he was phoning up and asking for a bit of help as to what to put on his tax return, and of course he had made a £40,000 donation to charity and had no income, so he had a nasty shock as he had a big tax bill.”

Gift Aid

You can view other topics covered in this series such as PPR and buy-to-let by visiting the content series page, or watch the full Sage Self Assessment Summit by registering here.

Tags:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.