For gift aid what does "tax paid IN the year" mean

For gift aid what does "tax paid IN the year" mean

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Looking at the gift aid pages of gov.uk, it refers to "tax paid in the year" when discussing the potential for repayment under SA of gift aid wrongly claimed for a "non" taxpayer.

So, what does that really mean?  Obviously, for someone who has actually "Paid" tax in the year, i.e. through PAYE, that is clear, but what about people who havn't actually "paid" any tax in the year, i.e. on interest, dividends, self employment, or capital gains, but where there is a tax liability for the year, payable the following January.?

Common sense would suggest that "paid in the year" really means "due for the year", but since when did common sense matter.  

It's becoming an issue for a few of my clients now after the removal of dividend tax credits and tax deducted from interest. Quite a lot of people have a tax liability for 16/17 but havn't paid any tax in 16/17 (will pay it in Jan 18).  So what about gift aid payments in 16/17 - is it still valid for the charity to reclaim the 20% on gift aid for donations made in 16/17 when no tax was paid in 16/17 but will be paid in 16/17?  Same for the extension of the basic rate band due to gift aid to bring capital gains back from higher rate to lower rate - the CGT won't be paid until Jan 18.

It's just struck me and re-reading the gov/uk webpages, it constantly goes on about "tax paid in the year" rather than tax due for the year.  Anyone can give me some confidence that it really means "due for the year" and not on the actual cash flow timing date.

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By johngroganjga
16th Mar 2017 13:02

As you say, logically it must mean "paid in respect of the year, whether during it or after the end of it".

Another way of looking at it would be to ask how HMRC's online tax return software deals with a case where insufficient tax has been deducted to cover gift aid payments. Surely it doesn't exclude any July poa and and any January balancing payment from its calculation.

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By Paul D Utherone
17th Mar 2017 14:31

Covered by ITA s424 surely which deals with the charge to tax where "(a) an individual makes one or more gifts to charity in a tax year which are qualifying donations, and (b) amount A is greater than amount C"

Amount A is "the total amount of the tax treated as deducted from the gifts"; and

Amount C is the sum of "the amount of income tax to which the individual is charged for the tax year, and the amount of capital gains tax to which the individual would be chargeable for the tax year" (ignoring DT relief for the latter)

Based on that .gov.uk's "tax paid in the year" actually means Amount C - the tax charged for the year.

Perhaps you're over-reading what the page means by "in the year" when what it really means "for the year".

Ultimately legislation must trump an HMRC interpretive page reference.

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