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» Gift aid - for individuals » Gift of shares - for individuals » Tax benefits - for companies

The Chancellor of the Exchequer is committed to encouraging more tax effective giving to charity.

The main tax provisions are summarized below.

Gift aid - for individuals

Gift Aid enables a registered charity such as Thames Community Foundation to recover the basic rate tax paid on a donation by the donor. This has the effect of adding 28p to every £1 given to Thames Community Foundation, at no extra cost to the donor.

Any gift, regular or one off, large or small, qualifies for Gift Aid providing that the donor completes a Gift Aid Declaration.

This Declaration can be completed by post or by telephone and does not involve any complicated procedures. Once executed, the Declaration operates for all future donations to the Foundation by that individual if desired.

If the donor is a basic rate taxpayer, no further tax relief is due to the donor as on making the cash donation to the charity, the donor is treated as making the payment net of basic rate tax, currently 22%.

If the donor is a higher rate taxpayer, the donor can claim additional tax relief on the difference between tax paid at the higher rate and the basic rate {ie 18% (40% - 22%)}, in their annual Self Assessment tax return.

Example

A basic rate taxpayer makes a donation under the Gift Aid Scheme of £780 to Thames Community Foundation.

Thames Community Foundation receives £780 from the donor and can reclaim the basic rate tax paid on the donation from the Inland Revenue.

When this is added to the gift, Thames Community Foundation receives £1000 ( £780 donation + £220 tax relief = £1,000

A similar donation given by a higher rate tax payer would only cost the donor £609 after claiming personal tax relief for the higher rate tax paid on the gift and the sum credited to Thames Community Foundation would total £1000 after the Gift Aid tax rebate.

Gift aid declaration

Please have a look at our Gift Aid Declaration form.

Deeds of Covenant

Deeds of Covenant now operate under the Gift Aid scheme and no longer qualify for separate tax relief. Where a Deed of Covenant was in existence at the 5th April 2000 deadline it is protected until its expiry date and no separate Declaration needs to be completed to claim tax relief.

To find out more...

If you would like more information about tax implications the Inland Revenue has produced a booklet about giving to charity:

• IR65 Giving to charity by individuals

You can contact them by telephone on 0845 9000 404 or email saorderline.ir@gtnet.gov.uk or visit their site www.inlandrevenue.gov.uk

Or you can contact Nigel Hay at Thames Community Foundation who will be happy to provide more information.

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Gifts of shares - for individuals

From April 2000, individuals have been able to get tax relief for gifts to charity of listed shares and securities when calculating their income for tax purposes.

This relief is in addition to the existing relief on capital gains for gifts to charity of shares, securities and other assets.

A 'qualifying' investment is:

1. shares and securities listed or dealt in on the UK Stock Exchange, including the Alternative Investment Market
2. shares and securities listed or dealt in any overseas-recognised stock exchange
3. units in a UK authorised unit trust
4. shares in a UK open-ended investment company
5. holdings in certain foreign collective investment schemes Income tax relief is based on the 'market value' of the investments at the time of transfer to the charity and is given against an individual's income for the year in which the gift of shares or securities is made.

The amount which can be deducted is:

1. the market value of the investments at the date of the gift to the Community Foundation, plus
2. any incidental costs incurred in transferring the investments (such as broker's fees or stamp duty) less
3. any disposal proceeds or other money, or the value of any other benefits, or a person connected (such as a relative) received in consequences of the gift

Example 1

An individual gifts £1,000 worth of X plc shares to the Community Foundation during 2002/03. The donor is entitled to deduct £1,000 from the total income for the current tax year, thus saving 40% income tax if the donor is a higher rate taxpayer or 22% for a basic rate taxpayer.

No capital gains tax arises on the transfer of shares to Thames Community Foundation by the individual. Thames Community Foundation receives £1,000 of shares from the individual, which it can either hold as an investment or sell to realise their value.

Shares cost £200 Shares gifted valued at £1,000 Capital Gains Tax savings £320 Income Tax saving £400 Maximum tax saving £720

Example 2

Shares worth £100,000 Cost £55,000. Potential Capital Gain £45,000 True value to donor £82,000 (£100,000 less CGT of £18,000 payable on sale)
By gifting shares to the Community Foundation, the shareholding will be worth £100,000 to the Foundation.

The true cost of this gift to the donor will be only £42,000 as follows: Market value £100,000 CGT payable on sale £18,000 avoided. Income tax relief £40,000 (£100,000 @ 40%) Net cost to donor £42,000 Value to Thames Community Foundation £100,000

A family donation to the Quartet Community Foundation in Bristol

Alan and his wife decided to give some shares that Alan originally received as an inheritance from his mother.

The proceeds have been used to set up a charitable fund, named after the family and operated by the Foundation.

As a longstanding local family they want their fund to benefit local good causes.

Alan says: "This way I can dispose of the shares without paying capital gains tax and I can offset it against taxed income. It gives more money both to the Community Foundation and to the beneficiary charities."

To find out more...

If you would like more information about tax implications the Inland Revenue has produced a booklet about giving to charity:

• IR178 Giving shares and securities to charity.

You can contact them by telephone on 0845 9000 404 or email saorderline.ir@gtnet.gov.uk or visit their site www.inlandrevenue.gov.uk

Or you can contact Nigel Hay at Thames Community Foundation who will be happy to provide more information.

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Tax benefits - for companies

Managing a company's budget and its charitable giving

More and more companies, of whatever size, are thinking about developing policies on Corporate Social Responsibility and may also be receiving requests for donations from all sorts of charities.

Thames Community Foundation can help your company develop its local Corporate Social Responsibility and work as your grant making partner to deliver an innovative, effective and worthwhile local grants programme.

Why not take advantage of the grant making skills and local knowledge that persuaded leading local companies such as Adobe, British Airways, BSkyB, eBay, Gregg's and William Grant and Sons to set up Named Funds with us?

Setting up a Named Fund with Thames Community Foundation ensures that local causes are supported, reduces the administrative time spent by the company and also ensures recognition for the company of the donations being made.

Donations by limited companies

From 1st April 2000 donations are no longer eligible for Gift Aid but must be paid to the Foundation gross. The amount of the donation can, however, be offset against Corporation Tax so long as it is included in the company's tax return.

For example, (assuming your company pays Corporation Tax at the full rate of 30%) the company is now required, to make an effective donation of £10,000 to the Foundation to pay £14,300 and then to reclaim from the Revenue £4,300 by means of relief against Corporation Tax.

Payroll giving

The upper limit has been abolished and an unlimited amount can be contributed via payroll giving.

In addition, the Government will supplement all donations made by an additional 10%.

Gifts of Shares

A gift of qualifying shares to Thames Community Foundation is not subject to corporation tax and the value of those shares can be claimed as a deduction against the profit chargeable to corporation tax of the company.

While the savings are substantial, they are not as great as for individuals because the full corporation tax rate is only 30% as compared to the top income tax rate of 40%.

Example

Your company owns quoted shares worth £500,000 which cost £25,000 Either your company could sell and pay up to £190,000 capital gains tax or You could donate the shares to the Community Foundation and your company would then receive a corporation tax deduction of up to £150,000 (30% of the value).

Result

Your company donates £500,000 to Thames Community Foundation and it has cost only £160,000 (the shares given away were worth £310,000 after Capital Gains Tax liability offset by the £150,000 received by way of reduction in corporation tax.

A company donation to the Community Foundation serving Tyne & Wear and Northumberland

Ringtons Tea, based in Newcastle, decided to give shares worth £250,000 to add to their named fund they established with the Community Foundation in 1994.

They calculated that, in the present tax climate, it made more sense for the company to use the shares in this way, as selling them would have reduced their value by almost half.

Chairman Nigel Smith explained: "The Community Foundation is the ideal vehicle for us to manage our fund. The money is held as an endowment in our name, with the capital remaining forever and continuously growing, while the income from that investment goes to local charitable causes specified or chosen by us."

If you would like more information about tax implications the Inland Revenue has produced a booklet about giving to charity:

• IR64 Giving to charity by business
• IR65 Giving shares and securities to charity

You can contact them by telephone on 0845 9000 404 or email saorderline.ir@gtnet.gov.uk or visit their site www.inlandrevenue.gov.uk

Or you can contact Nigel Hay at Thames Community Foundation who will be happy to provide more information.