Income Tax Act 2007

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.

[F1 (4A) This Chapter is subject to section 809ZM (removal of income tax relief in respect of tainted charity donations etc).]

(5) For related reliefs for charities see Part 10 of [F2 this Act and Part 11 of CTA 2010.]

[F3 (6) For related reliefs for community amateur sports clubs see Chapter 9 of Part 13 of CTA 2010.]

Textual Amendments

F1 S. 413(4A) inserted (19.7.2011) (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 10

F2 Words in s. 413(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 524 (with Sch. 2)

F3 S. 413(6) inserted (17.7.2012) (with effect in accordance with Sch. 15 para. 17(2) of the amending Act) by Finance Act 2012 (c. 14), Sch. 15 para. 8

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 [F4 income tax at the basic rate, and]

(b) the basic rate limit [F5 and the higher rate limit] (see [F6 section 10]) [F7 and additionally, in the case of a Scottish taxpayer, [F8 the upper limit for the Scottish basic rate and the limits for any Scottish rates above the Scottish basic rate,]] 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

F4 Words in s. 414(2)(a) substituted (6.4.2018) by The Scottish Rates of Income Tax (Consequential Amendments) Order 2018 (S.I. 2018/459), arts. 1(2), 6(4)(a)

F5 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

F6 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

F7 Words in s. 414(2)(b) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Scotland Act 2016 (Income Tax Consequential Amendments) Regulations 2017 (S.I. 2017/468), regs. 1(1), 10(2)

F8 Words in s. 414(2)(b) substituted (6.4.2018) by The Scottish Rates of Income Tax (Consequential Amendments) Order 2018 (S.I. 2018/459), arts. 1(2), 6(4)(b)

[F9 414A Tax reduction or charge if basic rate, and devolved basic rate, differ U.K.

(1) Subsections (3) and (4) apply if an individual makes a gift to a charity which is a qualifying donation, and for the tax year in which the gift is made—

(a) the individual is a Scottish taxpayer or a Welsh taxpayer,

(b) there is a difference between—

(i) the applicable devolved basic rate, and

(ii) the basic rate, and

(c) any of the individual’s income is liable to the applicable devolved basic rate.

(2) In this section—

• ““the applicable devolved basic rate”—

  (a)

  is the Scottish basic rate if the individual is a Scottish taxpayer, and

  (b)

  is the Welsh basic rate if the individual is a Welsh taxpayer,

• “the ADBR amount” is the amount of the individual’s income liable to the applicable devolved basic rate, and

• “the rate difference” means the difference between the basic rate and the applicable devolved basic rate.”

(3) If, for the tax year in which the gift is made, the applicable devolved basic rate is above the basic rate—

(a) the individual is entitled to a tax reduction for that tax year,

(b) the tax reduction is given effect at Step 6 of the calculation in section 23,

(c) where the ADBR amount is more than or equal to the grossed up amount of the gift, the amount of the tax reduction is equal to the grossed up amount of the gift multiplied by the rate difference, and

(d) otherwise, the amount of the tax reduction is equal to the ADBR amount multiplied by the rate difference.

(4) If, for the tax year in which the gift is made, the applicable devolved basic rate is lower than the basic rate—

(a) income tax is charged under this subsection for that tax year,

(b) the individual is the person liable for the tax,

(c) where the ADBR amount is more than or equal to the grossed up amount of the gift, the amount of the tax is equal to the grossed up amount of the gift multiplied by the rate difference, and

(d) otherwise, the amount of the tax is the ADBR amount multiplied by the rate difference,

but see subsection (5).

(5) If, in the case of an individual (and ignoring this subsection), the total amount of tax charged under subsection (4) for a tax year is greater than the individual’s section 414(2)(b) tax saving for that year, the total amount of that tax is limited so as to be equal to the individual’s section 414(2)(b) tax saving for that year.

(6) For the purposes of subsection (5), the amount of an individual’s “section 414(2)(b) tax saving” for a tax year is—

(a) if the amount calculated at Step 5 of the calculation in section 23 in the individual’s case for that year is less than it would be were section 414(2)(b) not to have effect, equal to the difference, and

(b) otherwise is nil.]

Textual Amendments

F9 S. 414A inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Devolved Income Tax Rates (Consequential Amendments) Order 2019 (S.I. 2019/201), arts. 1(1), 12(8)

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 F10 ... .

Textual Amendments

F10 Words in s. 415 omitted (6.4.2018) by virtue of The Scottish Rates of Income Tax (Consequential Amendments) Order 2018 (S.I. 2018/459), arts. 1(2), 6(5)

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 [F11 F] are met, and

(b) the individual[F12 , or an intermediary representing the individual,] gives the charity[F13 , or an intermediary representing the charity,] a gift aid declaration relating to the gift (see section 428).

[F14 (1A) For the purpose of subsection (1)(b) an intermediary is—

(a) a person authorised by the individual to give a gift aid declaration on behalf of that individual to the charity,

(b) a person authorised by a charity to receive a gift aid declaration on behalf of that charity, or

(c) a person authorised to perform both of the roles described in paragraphs (a) and (b).]

(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.

[F15 (6A) Condition EA is that the payment is not by way of, and does not amount in substance to, waiver by the individual of entitlement to sums (whether of principal or return) due to the individual from the charity in respect of an amount—

(a) advanced to the charity, and

(b) in respect of which a person, whether or not the individual, has obtained relief under Part 5B (relief for social investments).]

(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.

F16 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F11 Letter in s. 416(1)(a) substituted (8.4.2010 with effect in accordance with Sch. 8 para. 8(5) of the amending Act) by Finance Act 2010 (c. 13), Sch. 8 para. 3(2)(a)

F12 Words in s. 416(1)(b) inserted (with effect in accordance with s. 20(4) of the amending Act) by Finance Act 2015 (c. 11), s. 20(2)(a)(i); S.I. 2016/1010, reg. 4

F13 Words in s. 416(1)(b) inserted (with effect in accordance with s. 20(4) of the amending Act) by Finance Act 2015 (c. 11), s. 20(2)(a)(ii); S.I. 2016/1010, reg. 4

F14 S. 416(1A) inserted (with effect in accordance with s. 20(4) of the amending Act) by Finance Act 2015 (c. 11), s. 20(2)(b); S.I. 2016/1010, reg. 4

F15 S. 416(6A) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 11

F16 S. 416(8) omitted (8.4.2010 with effect in accordance with Sch. 8 para. 8(5) of the amending Act) by virtue of Finance Act 2010 (c. 13), Sch. 8 para. 3(2)(b)

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.