No one has made the gift they want to know how best to make it which was the whole point of getting feedback!!
I’m heading to the pub chaps I need a pint!
I totally get Johns points and totally understand the issues
I also totally get that the client wishes to explore the options and discuss with the business partner whether they can share the donation and what the situation might then be
What I don’t appreciate is the personal nature of responses though chaps - I thought this forum was a useful sounding board at times to explore the tiny elements of doubt that can arise and to make sure we haven’t missed something and to help fellow colleagues focus the mind as well as our own at times.
Being told I’m maybe not fit for purpose though is going a bit far in my opinion
Oh dear this is getting silly now for something where we’re just exploring if there’s any option anywhere because it’s a sad story lying behind all this with a child dying of cancer and few options.....
So Jim wanted to give £3000 to a family towards their cancer treatment in the US and I said you won’t get tax relief it’s not a charity
He pays tax at 45%
He said he could pay it from his partnership business if the partner agreed
The other partner pays tax at 20% (ignore NI!)
So no one gets tax relief but if the partner agrees it’s something they want to do and they pay from business they each will still get taxed on the taxable profit but then at their own marginal rate. Jim’s profit share is a bit less and the other partners a bit more
Or they don’t put it via the partnership and pay out of their own pocket but we have a situation with these individuals having different marginal rates so if Jim’s profit share goes down he saves 45% and the other partner pays 20%
My advice to them now is to speak to the children’s charities they work with, see if the charity can help the family in any way and then give to the charity and get Gift Aid relief where possible (including the charity) and problem solved!
I agree chaps it’s an add back so no change to taxable profits !
But if partner A agrees with partner B that they will pay £3k from their business account (and it’s added back) and partner B (a basic rate tax payer) then takes half of that add back then it’s surely better than if Partner A (a highest rate taxpayer) just took the whole add back on his side isn’t it? Eg they’re agreeing that they’ll each effectively give £1500 and that’s how it then affects the tax result.
Hi John but if the partners paid a donation from the business and it was added back as non-deductible and then the profit shared between them with one partner paying 20% and the other 45% then surely that’s better than the higher earning partner paying from his own funds? This assumes the lower earning partner agreed? I appreciate that if this is were a charitable donation then it’s only Gift Aid relief on the table (in case we had crossed wires)
I don’t know the full background story but the business already does a lot with local children’s charities and this seems to have come to their attention via them - I’ve suggested whether, with assurances that the local charity will help this family - that they can perhaps give to that charity and then the family get the help accordingly. That then gets the Gift Aid relief for the partners - achieves the desired end result etc etc
This client isn’t someone who would fall for a scam but it’s a point that was well worth making that’s for sure
Alas if you give the money to a charity though and they then spend it on less worthy costs it’s a different matter.....
At least for future searchers though this underlines that unless you’re donating to a registered charity that simple fundraising exercises by individuals are not necessarily charitable donations (unless done under the umbrella of a charity eg London marathon type events)
My opinion was there’d be no possibility of tax relief on a non Gift aided donation but that was better to get the partnership to pay it and then tax on the slice of profit is shared between the partners (in hope that for some the marginal tax rate is lower than 45%)
After talking about the purpose of the donation I was hoping there might have been a .01% hope that such a one off local donation might have found a legitimate way but clearly not as a charitable donation isn’t a charitable donation unless it’s given to a registered charity (or amateur sports club!)
Thank you all for the input - hopefully he’ll still give the little chap the full £3k from the remaining pot after his donation to UK plc via HMRC
Nothing back in return other than hoping that there’s some way not to have to pay 45% tax on the added back profit
Obviously if it was a registered charity then there’d be gift aid relief available but this is just a family in dire need of help and he wants to do his bit
£3000 to them or nearly half to the tax man first and the balance to them.....
Alas it’s a partnership business not a company or the tax hit would only be 19%
Old story of lenders advertising great rates and then when a small business owner dares to apply for it huge barriers suddenly crop up and, hey presto, we're the bad guys.
Personally I always push clients wherever possible towards speaking to the likes of Santander, Natwest or Barclays where an element of common sense still prevails.
I'm just up the road from you, from memory, and if the company numbers fit then my contact at Barclays never comes up with ridiculous suggestions like your client has presented in such circumstances so, whilst I am sure you have your own network already in place, if you'd like a new name for the list then give me a shout.