Tax payer... or not ?

jem16

longforgotten wrote: »

You can use Gift Aid if the amount of Income Tax and/or Capital Gains Tax you’ve paid for the tax year in which you make your donation is at least equal to the amount of basic rate tax the charity or CASC and any other charities or CASCs you donate to will reclaim on your gift.

The entire link makes it even clearer as the OP will not have paid tax.

Savvy_Sue

Is this an occasion where a phone call to HMRC's charities section would be worthwhile? OP's husband can say what his income is from the various sources, how much he gets in dividends / tax paid on them, plus what he regularly gift aids.

jimmo

See point 3.5.2 here.

http://www.hmrc.gov.uk/charities/guidance-notes/chapter3/sectionb.htm

Speaking as a former taxman, I think it is illogical for non-repayable tax credits on dividends to be used to enable a charity to claim a repayment but taxmen are also very fond of saying “Rules is rules.” That guidance seems quite clear to me.

If the tax credits attached to your dividends covers the tax you deducted from your charitable donations you can utilise Gift Aid.

You may, or may not be a tax payer. What matters is that you have sufficient tax credits on dividends to cover the charity’s repayment claim.

nomunnofun

Have to agree with jimmo on this.

I had a client a few years back who for some reason was paying afew thousand in gift aid payments to a cancer charity. She would have had no liability had it not been for this gift aid payment. Her only income was state pension and dividends. The amount recoverable on the gift aid was reduced by the tax credits on the dividends on the self assessment calculation.

Section 3.5.2 in jimmo's link covers this.

Pennywise

Just to prove that dividend tax credit is "tax" for these purposes, I've just put a dummy through the tax return software. I've put in £4.5k net of dividends with £.5k tax credits which gives gross dividends of £5k. No other income at all. Then £2k of payments to charity (grossed up to £2.5k with the £.5k of tax). The system shows a balanced tax position - i.e. £500 dividend tax credit set against the £500 charity tax which the charity will reclaim.

If I increase the charity, then it produces a tax liability on the SA return, which is right because the excess tax relief claimed by the charity is repayable by the taxpayer through the SA return.

So, definitive that the tax credits on dividends are "TAX" for charity donations purposes, even if the total income of the individual is within the personal allowance.

longforgotten

Bit of a roller coaster this one

Thanks to all, especially Pennywise