2016 08 18 406774 800x380 - Gift Aid donations only available to taxpayers

Gift Aid donations only available to taxpayers

The Gift Aid scheme is available to all UK taxpayers, but in order to sign up to the Gift Aid scheme when you make a donation, you must be paying UK income tax.

There are clear advantages for charities if you make your donation in this way. The charity or Community Amateur Sports Clubs (CASC) concerned can take your donation and, provided all the qualifying conditions are met, can reclaim the basic rate tax, which means that the value of your donation increases by 25p for every pound donated to charity.

Higher rate and additional rate taxpayers can also claim additional income tax relief. This is based on the difference between the basic rate and their highest rate of tax.

For example:

If a taxpayer donates £500 to charity, the total value of the donation to the charity is £625; the charity claim the £125 difference from HMRC. The taxpayer can also claim additional tax back of:

  • £125 if they pay tax at 40% (£625 × 20%),
  • £156.25 if they pay tax at 45% (£625 × 20%) plus (£625 × 5%).

Planning warning. One of the conditions for an effective claim for Gift Aid is that you must have paid enough tax in the relevant tax year to cover the tax credit that the charity can claim from HMRC. The rules state that your donations will qualify for tax relief as long as they are not more than 4 times what you have paid in tax in that tax year. If you have claimed more tax relief than you are entitled to you will need to notify the charity and pay back any excess tax relief.

2017 07 13 306131 800x380 - Online filing exclusions for 2016-17

Online filing exclusions for 2016-17

HMRC’s list of exclusions from online filing for 2016-17 continues to multiply. The list of exclusions has been updated with the publication of version 4.0 of the document. There are now a total of 32 live exclusions on the list including 5 new additions to the list.

Many of these issues exist as HMRC has been unable to update its software to properly deal with all the various combinations arising from the changes to the dividend tax, personal allowance and savings allowances from April 2016. It is thought that a relatively small number of taxpayers will be affected by these issues. However, this will cause problems for those affected and some will be required to step back in time and submit tax returns in paper form.

In other words, the legislation in these areas has outpaced the ability of HMRC’s programmers to update their online filing software.

The exclusions include:

  • Taxpayers with savings and non-savings income over £32,000 of which the non-savings income is between £11,000 and £16,000.
  • The basic rate band is extended incorrectly for dividends of more than £118,000 where the taxpayer is liable to additional rate tax.

In a recent update HMRC said:

‘HMRC is working hard to ensure that no tax is incorrectly assessed for a very small number of self assessment customers, who have a very unusual combination of income types. HMRC is committed to helping customers file online for 2016/17 and is discussing how best to achieve this with agent representatives and software providers. Further information will be provided, as soon as it becomes available.’

Planning note: If you are affected by the inability of HMRC’s software to cope with your return, and you need to file a paper return for 2016-17, HMRC will accept the late return of a paper return up to 31 January 2018 on the basis that the taxpayer had a reasonable excuse for late submission. HMRC advises that a reasonable excuse claim should be sent together with the paper return. HMRC has said that they expect to be able to fix these issues for 2017-18, and subsequent tax years.

Please call if you need help in dealing with these formalities.