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Tax relief on charitable donations

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Hello Accountinweb community,

 

I have recently taken on a client who is very religious and who has asked whether there is a maxium charitable donation figure which can be declared each accounting year for tax relief purposes.

Does anyone know if there is a limit on tax relief and what it is please?

 

Kind regards

Daniel

Replies (16)

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By pauld
03rd Feb 2021 13:35

No limit to gift aid, but you need to have paid enough tax to cover that reclaimed by the charities.

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By possep
03rd Feb 2021 13:57

A bit worrying that you are taking on clients and don't know this.

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By DJKL
03rd Feb 2021 14:25

To be fair it is not something one comes across that often, I only once had a client with a tax charge re Gift Aid and that was years ago (1990s)

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By Tax Dragon
03rd Feb 2021 15:04

And the rules have changed since then, I think. (Also, Gift Aid was going to be brought within the £50k limit thing for overall reliefs; it was taken out only on protest.)

To say that accountants should "know" the answers misses the point. Badly. Answers change and staying on top of everything is impossible. (I've given many an answer in here that has turned out to be out of date. And I'm not alone in that.) Had possep's criticism been that an accountant should know where to find the (current) answer, I might have been more minded to agree with it. (Though when the questioner is looking for something that doesn't exist, that can be a hard thing to find.)

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Replying to Tax Dragon:
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By possep
03rd Feb 2021 15:51

It was a lazy original post and not difficult to find the answer was it.

https://www.gov.uk/government/publications/charities-detailed-guidance-n...
I would expect anyone involved with tax returns to be aware of the "maximum" that can be paid under gift aid.

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By Tax Dragon
03rd Feb 2021 16:14

I don't know (irony is I didn't have to look to know the answer! :) But my point stands IMHO.)

As for your last point, I have a few clients that give around the 10% mark. I can't think of (m)any that give the "maximum".

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By Daniel Anderton
03rd Feb 2021 16:56

Many thanks for your responses.

'possep' sometimes you take on clients and they ask for all sorts of things after signing the engagement letter. Also, engagements often tend to change over time. No further reply is required. If you don't want to provide assistance to another professional then just don't comment. You obviously know everything and never have to ask any questions or check anything with anyone. Good for you.

Tax Dragon - this client is considering giving up to 10% of revenue to charities.

Kind regards
Daniel

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Replying to Daniel Anderton:
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By possep
04th Feb 2021 07:37

Of course I don't know everything. I never said I did. I have asked questions but I would do some basic research first particularly on such a simple matter. It took 15 seconds to find the link I gave you. I think you have took offence because you didn't bother looking first.

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By Tax Dragon
04th Feb 2021 08:00

Just out of interest, did you find the answer to the question within that linked document?

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By paul.benny
04th Feb 2021 08:57

The link provided gives guidance for charities receiving donations; from what I could see there is little about the position of donors.

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By possep
04th Feb 2021 09:44

Yes.

The donor must be charged with Income Tax and/or Capital Gains Tax for the year of donation at least equal to the tax treated as deducted from their donation. If more than one Gift Aid donation has been made in the tax year they must be added together to work out the tax the donor must be charged with.
If the donor is not charged with sufficient tax to cover the Income Tax deducted from their Gift Aid donations then they will owe the amount of the difference in tax to HMRC read paragraph 3.5.

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Replying to possep:
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By Tax Dragon
04th Feb 2021 10:01

That's like saying the maximum loss relief you can get is the amount of tax you would otherwise pay in the year. But that doesn't tell you the maximum loss you can set off in the year.

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Replying to Tax Dragon:
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By possep
04th Feb 2021 10:27

para 3.5

Example
During the 2015 to 2016 tax year (basic rate of tax 20%), a donor (Mr Green) who only pays a small amount of Income Tax each tax year wins a tax free cash prize of £10,000 in a competition. He decides to share his good fortune and makes Gift Aid donations of £800 to charity A and £1,600 to charity B.
Charity A claims Gift Aid tax relief of £200 and charity B £400 - the total Gift Aid tax claimed by the 2 charities on Mr Green’s Gift Aid donations in the tax year is £600. However, Mr Green only paid Income Tax of £250 during the 2015 to 2016 tax year and so he owes the £350 difference in tax (£600 total Gift Aid tax claimed less £250 Income Tax paid by Mr Green) to HMRC.

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Replying to possep:
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By Tax Dragon
04th Feb 2021 11:11

But your Mr Green is still making the gifts of £2,400 under Gift Aid. He hasn't exceeded a "maximum". (And the charities still get their £600 back from HMRC.)

Let's try another example. A different Mr Green has income of £1m. (Not bad, but you should see what his wife makes!) Can he gift £700k to charity under Gift Aid? Or could he maybe gift enough to bring himself down to basic rate (I know someone that does that - not on £1m, but it is quite a sum)?

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By fawltybasil2575
04th Feb 2021 10:56

@ Daniel.

Could I please interpose a question, your response to which could materially impact upon the answer to your original question.

You say:-

“a client . . . . has asked whether there is a maximum charitable donation figure which can be declared (I assume you mean "paid") each accounting year . . . "

Noting your reference to the “accounting year”, may I ask whether the client is operating as (i) a sole trader or (ii) as a limited company [and, depending upon whether (i) or (ii) applies, he is proposing that the donation(s) be made by himself as an individual or by the limited company].

Basil.

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Replying to fawltybasil2575:
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By Tax Dragon
04th Feb 2021 11:12

Good spot... we might not even be talking about Gift Aid at all!

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