The festive season should be about the joy of giving, not the pain of retail says Anna Gaston. Here’s why Giving Tuesday should be the date in your diary.
With apologies to those people who resist the gradual encroachment of the Yuletide spirit into what can only be termed ‘late autumn’; we have certainly reached the time of year where gifts and charity are forefront of our minds.
Forget Black Friday (which we are led to believe, by the popular press, is generally a con anyway), cast out the Scrooge-inspired dreams of ‘doing’ the festive season on the cheap - the date for your calendar should really be Giving Tuesday.
Tuesday 29th November marks the now annual Giving Tuesday to start the charitable season. Giving Tuesday is a prime example of the impact that social media has had on the charitable sector as activists aim to promote participation in local charities, by donations of money, or time, to local causes. Potential volunteers and donors may wish to consider the ways in which they can maximise the benefit to their chosen charities by taking advantage of the Gift Aid scheme.
Under the Gift Aid rules a recognised charity, may claim 25p from HMRC for every £1 donated by individual donors. For example, where an individual makes a donation of £100, the charity will be able to claim a further £25 from HMRC to make his donation £125.
Where the donor is a higher or additional rate taxpayer, they may also be able to reclaim additional tax back or nominate that the charity receives it. So in my example, if the donor pays tax at 40 per cent he can personally claim back £25 (£125 x 20 per cent) from HMRC in relation to their £100 donation. In many cases we find people choose to pass that benefit on to their chosen charity thus enhancing a donation of £100 to £150.
In order to qualify for the Gift Aid scheme, the donor must be paying enough tax – donations will qualify as long as they’re not more than four times what the donor has paid in tax (income or capital gains) in that tax year (6 April to 5 April).
The gift must be to a recognised charity, and the individual has to provide the charity with a declaration that they are a UK taxpayer, and that the income or capital gains tax paid by that individual exceeds the amount that the charity will be able to claim in Gift Aid on that donation. A recognised charity is one which is based in the UK, or the EU, Iceland, Liechtenstein or Norway, and is registered with the Charity Commission (or relevant foreign authority) and is recognised by HMRC.
Corporate donors may also make donations to charities and take advantage of the Gift Aid rules. In the case of a corporate donor the charity will not be able to reclaim any tax from HMRC, as the amount of the donation from the corporate donor will be paid gross. The company can then declare the charitable donation to reduce its taxable income.
In each case, the charity and donor need to be careful to ensure that the donor, or a person connected to the donor, does not receive a ‘benefit’ from their donation. Charities may want to thank donors by some token gesture, but in doing so they must be careful that the value of that gesture does not exceed set financial levels.
So instead of giving to the unscrupulous retailers who are trying to persuade you that you are getting a bargain, why not give to a charity and get a real (and HMRC acceptable) benefit in the form of warm fuzzy goodness or a tax rebate…
Anna Gaston is an associate at boutique private wealth law firm Maurice Turnor Gardner