Having to pay tax on charity earnings. Help!

CLAPTON

Gertie_Walker wrote: »

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.

no, because the money for sponsorship is a gift and not gained by way of trade.

redpete

Daveee wrote: »

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

You would have declared to the charity that you have paid sufficient tax to cover the amount they would claim on your donation. Note that this does not have to be tax you have paid on the £2000, e.g. if you pay tax on other income such as a pension then this is OK.

If however you have not paid approx £400 in tax then your declaration is false. I don't know how or from whom HMRC would try to recover the Gift Aid refund in this circumstance.

Also, as someone else has pointed out, you can't be made to pay tax and pay back the Gift Aid refund - that would be penalising you twice.

TM1976

redpete wrote: »

Also, as someone else has pointed out, you can't be made to pay tax and pay back the Gift Aid refund - that would be penalising you twice.

I agree that this is true but I think it's down to the way the OP expresses it. Having earned £2,000 gross the tax due at 20% would be £400. For gift aid though you would be gifting the tax you had paid, so if the charity took gift aid on £2,000 the gift aid given would be on the basis of the gross which would be £2,500 - so they'd take £500 of tax.

i.e. The OP pays his tax liability on the earnings of £400 + the extra £100 of tax the charity has taken in gift aid that he didn't pay in the first place.

Again - no idea how this recovery works in practice but I don't think your accountant is giving duff advice.