P E R S O NA L TA X
TAX RELIEF ON CHARITABLE DONATIONS QUESTION:
A M
fter Christmas I often end up with a pile of unwanted items such as jumpers, scarves and CDs. As a higher rate tax payer can I get tax
relief for donating these items to a charity? ANSWER:
aybe. It depends whether the charity you donate the items to operates the relevant scheme and actually sells the items you
donate.
are a UK tax payer. So there should be some paperwork Legislation summarises tax relief on charitable donations
to complete when you take unwanted items to the
as: ‘Relief for some gifts of money to charities by
shop. Charities usually provide annual or quarterly
individuals’. Since your unwanted jumpers etc are not
statements showing dates of goods sold, amount of cash
money they would generally not qualify for tax relief.
donated and the tax claimed. You will need these statements to claim tax relief on the donation on your
However, some charities operate a system that allows for
tax return.
any income generated from the sale of goods to be considered under the Gift Aid scheme.
It is worth also bearing in mind that as the charity is acting as agent, if you already have a business of retailing
To summarise the scheme, you would allow the charity
jumpers, scarves etc or you have a vast quantity of goods
to act as agent to sell the goods on your behalf. The
for sale, this could be viewed as trading by HMRC.
goods in the shop are still legally your property, so when
Although likely to be rare, if frequent or connected to a
the goods are sold, the income received after selling
trade, the income generated could be liable to income
costs, belongs to you and not the charity. It is after the
tax even if all proceeds are donated to the charity.
sale that you can agree to donate all or part of the net cash proceeds to the charity. This would meet the first
Full details of how these systems operate can be found in
condition for gift aid, that the donation is ‘a gift in the
HMRC’s guidance. Search the internet for “charities:
form of a payment of money’. However, to receive the
detailed guidance notes on how the tax system
tax relief you must make a valid gift aid declaration to
operates” and see chapter 3 Gift Aid, subsection 3.42
cover the cash donations you wish to make. There are also further conditions to satisfy for people who are “connected” with the charity. I assume this doesn’t apply to you but those conditions can be found by searching the internet for “conditions B - E section 416 Income Tax Act 2007”. You may wish to contact charities in your area to see if they operate this scheme. The items, sales and donations will need to be logged and you will need to confirm you
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FEBRUARY/MARCH 2021
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