CTC, WTC and charitable donations

bestpud

liney wrote: »

In my opinion it is immoral to lower your income deliberatley in order to recieve benefits.

This is the bit I was referring to when I mentioned people making money out of donating. It reads as though you believe they are committing 'legitimate' fraud. If they were reducing thier income to receive benefits, then surely that would imply they would be getting something from it for themselves?

However, I do actually see your point. I just don't see it as morally wrong as you do - mainly because I think many charities do very good work and the government rely on them to carry out services they themselves would otherwise have to provide (at greater expense to the public purse!)

That doesn't apply to all charities obviously and as I said, I do see your point. Perhaps there should be a limit placed on the donations allowable?

lawdel18

Hi, You Can Deduct Gift Aid From Your Income Obviously If It Is A Large Amount You Entilment May Increase

MarkyMarkD

liney wrote: »

Edited to say i think some are missing the point here. The pledger does benefit because for each £100 he donated he recieves £37 back. If he pledges £100 it should cost him £100, not him £63 and the goverment £37 which they now have to pay him in tax credits.

The giver (and I don't know why you use the word "pledge" which relates to amounts promised but not yet given) does NOT benefit other than in the knowledge that their charity receives money from the government. They give £63 out of their after-benefits income to the charity. The government adds £37 to that.

The cost to the giver is £63 and the charity receives a total of £100.

If the giver had not used Gift Aid, they could have given £63 and the charity would have received a total of £63.

The only party benefitting by Gift Aid, in this situation, is the charity. And that's why the tax & tax credit rules work like this.

The only situation in which a giver appears to benefit from Gift Aid is a higher rate taxpayer who pays over £78 from their after-tax income and gets tax relief on the difference between 40% tax they have paid and 22% tax which the charity assumes to have been paid (and recovers). So the charity recovers £22 from HMRC and the taxpayer recovers £18. But even then the overall effect is equivalent to the taxpayer giving £60 and the charity receiving £100 - and therefore no different from the taxpayer's point of view to the taxpayer giving £60 and the charity receiving only £60 if Gift Aid was not used.

So let's get down to brass tacks. Do you object to all Gift Aid tax relief for charities, or is it for some reason only unfair if the giver is on tax credits rather than a taxpayer?

(And, for the avoidance of doubt, I know that some people are both on tax credits and taxpayers, but for simplicity I'd rather leave that out of this debate).

liney

I am not objecting to gift aid. I am am objecting that i can earn £200 , give £100 of it away to charity, tell tax credits i only earn £100 (legitimately) and they will then give me benefits.

robindunne1

liney wrote: »

I am not objecting to gift aid. I am am objecting that i can earn £200 , give £100 of it away to charity, tell tax credits i only earn £100 (legitimately) and they will then give me benefits.

Giving to charity free of any tax obligation is enshrined across most of the tax regimes in the western world - even the Yanks do it! The problem here is the tax credit legislation which bases a persons income on their taxable income and then calculates a higher reward on lower incomes.

For me, the tax credit system is full of holes. The principle is good, but the reality is completely different. The nature of the system acts as an incentive to people to reduce their income. It rewards people for earning less and penalises people for earning more.

There is an effective 70% income tax rate on those in the tax credit bracket (22% income tax, 37% Tax credit withdrawal and 11% NI). Those with a student loan and paying pension contributions, the loss in financial benefit can be as high as 90%! so what is the point of earning more?

If you have a beef with the charitable giving side of things - there are plenty of other reasons to be angry about tax credit policies of this government.

Gardon Brown has been banging the TC drum for years on how it is helping low income families, but the reality is that it confuses the very people it is meant to help.

It would be much easier to increase the minimum wage and give people personal tax allowances that are meaningful instead of relying on the error strewn, conveluted money merry go round of paying tax and having apply to have it paid back to you.

SCRAP TAX CREDITS AND TAX US LESS INT EH FIRST PLACE!

MarkyMarkD

I agree with most of what you say, robin, apart from the minimum wage bit. I can't honestly accept that minimum wage helps.

The problem, as you point out, is that all means-tested benefits (and, let's face it, tax credits are just disguised benefits) lead to poverty trap issues which are actually hard to avoid.