Having to pay tax on charity earnings. Help!

Daveee

When I retired recently I decided to do some part time work to help the local hospice, just buying and selling small items on table top sales etc. Last year I managed to raise £2000 which I donated. I felt quite pleased with myself. However I have just seen my accountant and he has confirmed I will have to pay tax on this £2000 at 20% plus I will have to repay the gift aid! An overall amount of over £600. I am on pension and although comfortable I feel this is unjust and it has taken away all incentive for me doing more.
Has any one else had this problem and what can be done?

molerat

As it is your income you will have to pay tax on it but I do not understand why you will have to re-pay the gift aid. If you pay tax you can gift aid. Are you paying tax in excess of the gift aid amount ?

Daveee

He told me as the charity had claimed gift aid on my donations I would have to repay it, does that make sense?

Gertie_Walker

When you were selling these items, did you sell the buyers that proceeds would go to charity?
Did the money go into your bank account?
You would only need to repay the gift aid if you were nto liable to tax and as you appear to be so liable, I don't understand this comment.

PlutoinCapricorn

The charity should only claim gift aid on donations by people who make a declaration that they pay tax and that the income tax that they pay is enough to cover the claimed amount.

Did you fill in a declaration?

Daveee

Yes the customers were told and it was displayed. I have the donation receipts and the letters of authority. I dont understand when I was doing this for a good cause why I am being penalised.

Gertie_Walker

In view of what you say, I don't agree with your accountant. The money was always destined for the charity and you did not profit in any way, the charity knew it was getting the money. I suggest you challenge your accountant to show you the legislation which demands you pay tax on this fundraising effort.

TM1976

I think the accountant is correct because this is trading income, even though the entire profit was donated to charity it doesn't make it tax deductable.

Best thing you can do is ask the charity to return your tax because you made the donation in good faith and didn't expect to incur a tax liability.

If you were engaged by the charity to do this then the income wouldn't be taxable (as it was the charity's income). I'm not sure if this is what you were doing or thought you were doing in which case the charity has got it wrong by pushing you down the gift aid route - ie workng for yourself and making a donation to the charity rather than working for a charity doing an activity that yielded a profit for the charity.

MrsManda

I am not a professional but I think the fact you bought and sold items on your own, (rather than as an employee of the charity) means that the profit is classed as your income and thus you pay tax on it.

The fact that you donated it means you may have been able to have claimed the tax back but as you gave the hospice your details to allow them to claim Gift Aid this isn't an option.

In order for the Gift Aid to be claimed, tax needs to have been paid on amount in the first place.

laurel7172

I disagree with your accountant. Gift aid can be clawed back if you haven't paid enough tax to cover it. Therefore, if you pay tax on the income, there should be no need to pay back the gift aid. You only have to pay tax once.

In making a charitable gift, either you raise the money on behalf of the charity (in which case it isn't yours to Gift Aid), or you trade, pay tax and can then Gift Aid it. You appear to have tried to do both, which is why you've run into bother.

Gertie_Walker

If you follow your accountant's logic, then anyone doing a sponsored bungee jump, car wash, run up Ben Nevis, etc would have to pay tax on the money they collect before handing it over to the charity.