Income Tax Act 2007

Chapter 2 U.K. Gift aid

The relief U.K.

413 Overview of Chapter U.K.

(1) This Chapter gives relief for some gifts of money to charities by individuals.

(2) The relief is set out in section 414.

(3) The Chapter contains provisions under which, in some circumstances—

(a) the individual's entitlement to some other reliefs may be restricted (see section 423), and

(b) the individual may be charged to income tax (see section 424).

(4) See section 430 for bodies that are treated as charities for the purposes of this Chapter.

(5) For related reliefs for charities see Part 10 of this Act, section 25(10) of FA 1990 and section 505 of ICTA.

414 Relief for gifts to charity U.K.

(1) An individual who makes a gift to a charity which is a qualifying donation is entitled to the relief set out in subsection (2).

(2) The Income Tax Acts have effect in their application to the individual for the tax year in which the gift is made as if—

(a) the gift had been made after deduction of income tax at the basic rate, and

(b) the basic rate limit [F1 and the higher rate limit] (see [F2 section 10]) were increased by an amount equal to the grossed up amount of the gift.

(3) See subsection (7) of section 535 of ITTOIA 2005 (gains from contracts for life insurance etc: top slicing relief) for provision about how relief under this Chapter is to be ignored for the purpose of calculating relief under that section.

Textual Amendments

F1 Words in s. 414(2)(b) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 6

F2 Words in s. 414(2)(b) substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 20

415 Meaning of “grossed up amount” U.K.

In this Chapter references to the grossed up amount of a gift are to the amount of the gift grossed up by reference to the basic rate for the tax year in which the gift is made.

416 Meaning of “qualifying donation” U.K.

(1) A gift made to a charity by an individual is a qualifying donation for the purposes of this Chapter if—

(a) conditions A to G are met, and

(b) the individual gives the charity a gift aid declaration relating to the gift (see section 428).

(2) Condition A is that the gift takes the form of a payment of a sum of money.

(3) Condition B is that the payment is not subject to any condition as to repayment.

(4) Condition C is that the payment is not a sum falling within section 713(3) of ITEPA 2003 (payroll deduction scheme).

(5) Condition D is that the payment is not deductible in calculating the individual's income from any source.

(6) Condition E is that the payment is not conditional on, associated with or part of an arrangement involving, the acquisition of property by the charity from the individual or a person connected with the individual.

An acquisition by way of gift is ignored for the purposes of this condition.

(7) Condition F is that—

(a) there are no benefits associated with the gift, or

(b) there are benefits associated with the gift but the restrictions on those benefits are not breached.

See sections 417 to 421 for provision about benefits associated with gifts.

(8) Condition G is that the gift is not a disqualified overseas gift (see section 422).

417 Meaning of “benefits associated with a gift” U.K.

A benefit is associated with a gift for the purposes of this Chapter if it is received by the individual who makes the gift, or a person connected with the individual, in consequence of making the gift.

Restrictions on associated benefits U.K.

418 Restrictions on associated benefits U.K.

(1) For the purposes of section 416(7), the restrictions on benefits associated with a gift are breached if condition A or B is met.

(2) Condition A is that the total value of the benefits associated with the gift exceeds the variable limit, which is—

(a) 25% of the amount of the gift, if the amount of the gift is £100 or less,

(b) £25, if the amount of the gift is more than £100 but not more than £1,000,

(c) [F3 5%] of the amount of the gift, if the amount of the gift is more than £1,000.

(3) Condition B is that the sum of—

(a) the total value of the benefits associated with the gift, and

(b) the total value of the benefits (if any) associated with each relevant prior gift,

is more than [F4 £500].

(4) “Relevant prior gift” means a gift—

(a) which has already been made by the individual to the charity in the tax year, and

(b) which is a qualifying donation.

(5) This section needs to be read with sections 419 to 421.

Textual Amendments

F3 Word in s. 418(2)(c) substituted (with effect in accordance with s. 60(3) of the amending Act) by Finance Act 2007 (c. 11), s. 60(1)(a)

F4 Word in s. 418(3) substituted (with effect in accordance with s. 60(3) of the amending Act) by Finance Act 2007 (c. 11), s. 60(1)(b)

419 Gifts and benefits linked to periods of less than 12 months U.K.

(1) This section modifies the application of section 418(2) in relation to a gift if condition A, B, C or D is met.

(2) Condition A is that a benefit associated with the gift relates to a period of less than 12 months.

(3) Condition B is that a benefit associated with the gift consists of a right to receive benefits at intervals over a period of less than 12 months.

(4) Condition C is that a benefit associated with the gift is one of a series of benefits which are—

(a) received at intervals, and

(b) associated with a series of gifts made at intervals of less than 12 months.

(5) Condition D is that—

(a) a benefit associated with the gift is not one of a series of benefits received at intervals, and

(b) the gift is one of a series of gifts made at intervals of less than 12 months.

(6) If condition A, B or C is met, then for the purposes of section 418(2)—

(a) the value of the benefit is taken to be the annual equivalent of its actual value, and

(b) the amount of the gift is taken to be the annual equivalent of its actual amount.

(7) If condition D is met, the amount of the gift is taken for the purposes of section 418(2) to be the annual equivalent of its actual amount.

(8) The annual equivalent of the value of a benefit, or of the amount of a gift, is calculated as follows.

Step 1

Multiply the value or amount by 365.

Step 2

If condition A or B is met in relation to the benefit (and neither condition C nor condition D is met in relation to it), divide the result by the number of days in the period of less than 12 months referred to in subsection (2) or (as the case may be) subsection (3).

If condition C or D is met in relation to the benefit, divide the result by the average number of days in the intervals of less than 12 months referred to in subsection (4)(b) or (as the case may be) subsection (5)(b).

Admission rights U.K.

420 Disregard of certain admission rights U.K.

(1) A benefit associated with a gift is ignored for the purposes of this Chapter if the benefit consists of a relevant right of admission.

(2) “Right of admission” means a right which—

(a) benefits the individual who makes the gift or that individual and one or more members of that individual's family (whether or not the right must be exercised by all of them at the same time),

(b) authorises admission to premises or property to which the public are admitted on payment of an admission fee, and

(c) authorises admission to those premises or that property without payment of the admission fee or on payment of a reduced fee.

(3) A right of admission is a relevant right of admission if—

(a) conditions A and B are met in relation to it, and

(b) either condition C or condition D is met in relation to it.

(4) Condition A is that the opportunity to make a gift and to receive the right of admission in consequence is available to the public.

(5) Condition B is that the right of admission is a right granted by the charity for the purpose of viewing property preserved, maintained, kept or created by a charity for its charitable purposes.

(6) The property mentioned in subsection (5) includes, in particular—

(a) buildings,

(b) grounds or other land,

(c) plants,

(d) animals,

(e) works of art (but not performances),

(f) artefacts, and

(g) property of a scientific nature.

(7) Condition C is that the right of admission applies, during a period of at least 12 months, at all times at which the public can obtain admission.

(8) Condition D is that—

(a) a member of the public could purchase the same right of admission, and

(b) the amount of the gift is greater by at least 10% than the amount the member of the public would have to pay.

(9) This section needs to be read with section 421.

421 Admission rights: supplementary U.K.

(1) This section applies for the purposes of section 420.

(2) Condition C is to be treated as met even if the right does not apply on days which are specified by the charity as event days, provided no more than 5 days are so specified in relation to the applicable period.

(3) The applicable period is—

(a) the period during which the right applies, in the case of a right which applies for a period of 12 months, or

(b) each calendar year during all or part of which the right applies, in the case of a right which applies for a period of more than 12 months.

(4) An “event day” is a day on which an event is to take place on the premises to which the right relates.

(5) In condition D the “same right of admission” means a right relating to the same property, classes of persons and periods of time as the right received in consequence of the gift.

Disqualified overseas gifts U.K.

422 Disqualified overseas gifts U.K.

(1) This section applies for the purposes of section 416(8).

(2) A gift is an “overseas gift” if—

(a) it is made by an individual to a charity at a time when the individual is neither UK resident nor in Crown employment, and

(b) ignoring condition G in section 416(8), it is a qualifying donation.

(3) An overseas gift made by an individual in a tax year is a “disqualified overseas gift” if, as a result of the gift, the overseas gifts total is more than the individual's charged amount (see section 427).

(4) In subsection (3) “overseas gifts total” means the sum of the grossed up amounts of all overseas gifts made by the individual in the tax year.

(5) In this section “Crown employment” means employment under the Crown—

(a) which is of a public nature, and

(b) the earnings from which are payable out of the public revenue of the United Kingdom or of Northern Ireland.

Measures to ensure donor's liability not less than tax treated as deducted U.K.

423 Restriction of certain reliefs U.K.

(1) This section applies if—

(a) an individual makes one or more gifts to charities in a tax year which are qualifying donations, and

(b) amount A is greater than amount B.

(2) In this section—

• “amount A” means the total amount of the tax treated as deducted from the gifts under section 414, and

• “amount B” means the total amount of income tax and capital gains tax to which the individual is charged for the tax year (before applying this section).

(3) For the purposes of this section, the total amount of income tax to which the individual is charged for the tax year is the amount calculated in accordance with section 425.

(4) The individual's entitlement to the reliefs mentioned in subsection (5) is extinguished, so far as is necessary to ensure that the total amount of income tax and capital gains tax to which the individual is charged for the tax year (after applying this section)—

(a) is equal to amount A, or

(b) if that is not possible, falls short of amount A by as little as possible.

(5) The reliefs are—

(a) an allowance under Chapter 2 of Part 3 of this Act F5 ... (personal allowance and blind person's allowance),

(b) a tax reduction under Chapter 3 of Part 3 of this Act F5 ... (tax reductions for married couples and civil partners),

(c) relief under section 457 or 458 of this Act F5 ... (payments to trade unions and police organisations), and

(d) a tax reduction under section 459 of this Act F5 ... (payments for benefit of family members).

Textual Amendments

F5 Words in s. 423(5) omitted (with effect in accordance with Sch. 1 para. 7 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 1 para. 6(o)(iii)

424 Charge to tax U.K.

(1) Income tax is charged under this section if—

(a) an individual makes one or more gifts to charity in a tax year which are qualifying donations, and

(b) amount A is greater than amount C.

(2) In this section—

• “amount A” means the total amount of the tax treated as deducted from the gifts under section 414, and

• “amount C” means the sum of—

  a)

  the amount of income tax to which the individual is charged for the tax year, and

  b)

  [F6 the amount of capital gains tax to which the individual would be chargeable for the tax year if the following were ignored—

  • (i) any relief under section 788 of ICTA

  • (ii) any relief under section 790(1) of ICTA (relief for foreign tax where no double taxation arrangements).]

(3) For the purposes of this section, the total amount of income tax to which the individual is charged for the tax year is the amount calculated in accordance with section 425, after taking into account any restriction of relief under section 423.

(4) The amount of the tax charged under this section is equal to the difference between amount A and amount C.

(5) Tax charged under this section is charged for the tax year in which the gift or gifts are made.

(6) The person liable for any tax charged under this section is the individual.

Textual Amendments

F6 Words in s. 424(2) substituted (retrospective with effect in accordance with art. 1(2) of the amending S.I.) by The Income Tax Act 2007 (Amendment) (No. 2) Order 2009 (S.I. 2009/2859), art. 4(3)

425 Total amount of income tax to which individual charged for a tax year U.K.

(1) For the purposes of sections 423 and 424, the total amount of income tax to which an individual is charged for a tax year is the amount calculated as follows.

(2) Calculate the individual's liability to income tax for the tax year in accordance with section 23, as modified by subsection (3).

(3) In applying section 23—

(a) at Step 6, ignore any tax reductions to which the individual is entitled for the tax year under a provision listed in subsection (4), and

(b) ignore Step 7.

(4) The tax reductions to be ignored are tax reductions under—

(a) section 453 (qualifying maintenance payments),

(b) section 788 of ICTA (double taxation arrangements: relief by agreement), or

(c) section 790(1) of ICTA (relief for foreign tax where no double taxation arrangements).

(5) From the amount calculated in accordance with subsections (2) to (4) deduct—

(a) any tax treated as having been paid under—

(i) section 399(2) or 400(2) of ITTOIA 2005 (distributions from UK resident companies etc on which there is no tax credit),

(ii) section 414(1) of that Act (stock dividend income),

(iii) section 421(1) of that Act (release of loan to participator in close company),

(iv) section 530(1) of that Act (gains from contracts for life insurance), or

(v) section 685A(3) of that Act (settlor-interested settlements), F7 ...

(b) any tax treated as deducted from estate income under section 656(3) or 657(4) of ITTOIA 2005, so far as that income is treated under section 679 of that Act as paid from sums within section 680(3)(b) or (4) of that Act[F8 , and

(c) the amount of any tax credit under section 397A of ITTOIA 2005 (tax credits for distributions of non-UK resident companies: UK residents and eligible non-UK residents).]

(6) For the purposes of this section a person is treated as being entitled to a tax reduction under section 788 of ICTA if the person is entitled to credit against income tax under double taxation arrangements.

Textual Amendments

F7 Word in s. 425(5)(a)(v) omitted (21.7.2008 with effect in accordance with s. 34(2) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 12 para. 24(a)

F8 S. 425(5)(c) and word inserted (21.7.2008 with effect in accordance with s. 34(2) of the amending Act) by Finance Act 2008 (c. 9), Sch. 12 para. 24(b)

Election to carry back relief U.K.

426 Election by donor: gift treated as made in previous tax year U.K.

(1) If—

(a) an individual makes a gift to a charity that is a qualifying donation, and

(b) the condition in subsection (2) is met,

the individual may elect to be treated as if the gift had been made in the previous tax year (“year P”).

(2) The condition is that the individual's charged amount for year P (see section 427) is at least equal to the increased total of gifts.

(3) If an election is made, sections 414 and 423 to 425 have effect in relation to the individual as if the gift were a qualifying donation made by the individual in year P.

(4) The increased total of gifts is the sum of—

(a) the grossed up amount of the gift, and of any gifts that are the subject of the same election or an election made at the same time,

(b) the sum of the grossed up amounts of any gifts to charities made by the individual in year P which—

(i) are qualifying donations, and

(ii) are not themselves treated as made in the tax year before year P because of an election under this section, and

(c) the sum of the grossed up amounts of any gifts which, as a result of an earlier election under this section, are treated as made in year P.

(5) The grossed up amount of the gifts mentioned in paragraphs (a) and (c) of subsection (4) is to be determined as if the gifts were made in year P.

(6) An election must be made—

(a) on or before the date on which the individual delivers a return for year P under section 8 of TMA 1970 (personal return), and

(b) not later than the normal self-assessment filing date for year P.

(7) An election does not affect the position of the recipient of the gift (see section 520 (gifts to charitable trusts: income tax treated as paid) and section 25(10) of FA 1990 (gifts to charitable companies)).

(8) This section does not apply to gifts which are treated as qualifying donations under section 429 (giving through self-assessment return).

Supplementary U.K.

427 Meaning of “charged amount” U.K.

(1) For the purposes of this Chapter, an individual's charged amount is the amount calculated as follows.

(2) Calculate the amount of the individual's modified net income for year X (see section 1025).

(3) Calculate the amount on which the individual is chargeable to capital gains tax for year X.

(4) Add together the amounts calculated under subsections (2) and (3).

The result is the individual's charged amount for year X.

428 Meaning of “gift aid declaration” U.K.

(1) In this Chapter “gift aid declaration” means a declaration which—

(a) is given in the manner specified by regulations made by the Commissioners for Her Majesty's Revenue and Customs, and

(b) contains any information and any statements required by the regulations.

(2) The regulations may provide for declarations—

(a) to have effect,

(b) to cease to have effect, or

(c) to be treated as never having had effect,

in any circumstances and for any purposes specified by the regulations.

(3) The regulations may—

(a) require charities to keep records with respect to declarations received from individuals, and

(b) make different provision for declarations made in a different manner.

429 Giving through self-assessment return U.K.

(1) This section applies if—

(a) as a result of a personal return for a tax year being made by an individual, a tax repayment for one or more tax years falls to be made to the individual, and

(b) conditions A and B are met.

(2) Condition A is that the personal return contains a single direction, in the form specified in the return, requiring—

(a) the whole of the tax repayment, or so much of it as does not exceed a specified amount, to be paid on the individual's behalf as a gift to a single listed charity which is specified in the return, and

(b) the gift to be treated as a qualifying donation for the purposes of this Chapter.

(3) Condition B is that the gift meets Conditions A to G mentioned in section 416.

(4) The gift is to be treated for the purposes of this Chapter as a qualifying donation made by the individual at the time the payment is received by the charity.

(5) In this section—

• “listed charity” means a charity which, at the time the personal return is made, is included (at the request of the charity) in a list maintained for the purposes of this section by the Commissioners for Her Majesty's Revenue and Customs,

• “personal return” means a return under section 8 of TMA 1970,

• “tax repayment” means a repayment (after any [F9 relevant set-off] ) of either or both of—

  (a)

  income tax or amounts paid on account of income tax, and

  (b)

  capital gains tax,

  and, for the purposes of subsection (2)(a), includes any repayment supplement (within the meaning of section 824 of ICTA or section 283 of TCGA 1992).

• [F10 “relevant set-off”, in relation to an individual, means any set-off that falls to be made against the individual's liabilities, other than any set-off under section 130 of FA 2008.]

Textual Amendments

F9 Words in s. 429(5) substituted (21.7.2008) by Finance Act 2008 (c. 9), s. 130(9)(a)

F10 Words in s. 429(5) inserted (21.7.2008) by Finance Act 2008 (c. 9), s. 130(9)(b)

430 “Charity” to include exempt bodies U.K.

(1) In this Chapter “charity” includes—

(a) the Trustees of the National Heritage Memorial Fund,

(b) the Historic Buildings and Monuments Commission for England,

(c) the National Endowment for Science, Technology and the Arts, and

(d) a club that is registered as a community amateur sports club for the purposes of Schedule 18 to FA 2002.

(2) For the purposes of the application of section 414(1) in relation to clubs that are charities as a result of subsection (1)(d) of this section, membership fees are not gifts.