Understanding Tax Relief Changes for Charitable Donations
Changes to the tax relief on donations to charities effective from 1st January 2013
Key Features of the Revised Scheme:
N.B. The changes summarised below only apply to qualifying donations to eligible charities and approved bodies from the 1st January 2013 – all previous donations up to and including the 31st December 2012 are still subject to the old rules – see Note 7 below for details). There is no change to the Corporate tax relief, companies continue to treat donations as a normal business expense and there is no upper limit on the amount that can be donated.
1: The tax refund for donations from all donors regardless of their tax status (PAYE or Self-assessed) will now go to the charity in all cases at a blended rate of 31%. Charities no longer need to ask donors about their tax affairs and the only reason that a refund claim will be rejected is if the donor has not paid sufficient tax in the relevant year to cover the reclaim or inaccurate details have been supplied.
2: The qualifying donation threshold remains at €250 and must still meet the condition of being given “at arms-length with no strings attached” i.e. there can be no benefit to the donor.
3: The tax relief will now be given at a blended rate of 31% regardless of the rate of tax paid by the donor and this will be on a grossed up basis.
Example: A donation of €250 will be grossed up at 31% as follows: €250*100/69 = €362.32 so the tax refund will be €362.32-€250 = €112.32. On this basis the tax refund on a donation of €500 will be €224.64 and on €1,000 it will be €449.27.
5: Donors can sign the approved certificate/form to cover qualifying donations over a five year period using the new CHY3 “enduring” form or if they prefer for one year using the CHY4 annual form. In each case they are giving the charity permission to claim a tax refund on the donation/donations of €250 or more during the period covered by the form.
6: Each form requires that the donor fills in their PPS number and signs the declaration form.
Changes to the tax relief on donations to charities up to and including the 31st December 2012
1: Donations up to 31st December 2012 are subject to the old rules so if you are a PAYE only taxpayer and you have not received a CHY2 form for 2012 please contact [email protected] to request a form or phone 043 33 25035 ( ext 5). We are able to claim the tax for the last four years so if you haven’t already done so and are a PAYE employee and have donated over €250 in any one year, please put it at the top of your “to do” list.