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Money Moral Dilemma: Should I tell my friends I get tax relief from our combined charity donations?

13

Comments

  • No doubt your employer also gets 'tax relief' from matching the donation - however that is not the problem, you are being a little 'judicious with the truth' and whilst the charities are benefitting, Ithink HMRC / employer would take a dim view if it came to light .....
  • Another way to put this would be 'Should I profit from my friends/employers charitable donations?'.  I think you should know the answer.  If you don't, here it is, of course you should be open with your friends, and arrange that your donation is sufficient to ensure that you do not profit from their generosity.
  • Isin2000
    Isin2000 Posts: 14 Forumite
    Seventh Anniversary 10 Posts
    Assuming you don't cross any tax boundaries you would have to donate approx £35 a week extra to offset the tax benefits (standard rate tax payer) to break even.
    As for defrauding HMRC - if your friends of their own free will give you money and you pass it on to a registered charity - it is hardly a case of money laundering worth spending public funds pursuing. 

    As for your employer they are making a philanthropic gesture up to a presumed a fixed amount. In the final analysis - what is the difference compared to funds donated for a sponsored event (walk, cake eating or whatever).

    If you feel guilty and want to give a bit extra to offset your tax benefits feel free to do so, but this is hardly big level financial crime.
  • You have a criminal mind, what else are you up to?
  • Grumpy_chap
    Grumpy_chap Posts: 17,045 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    I wonder whether this dilemma has been poorly edited.
    As presented, it appears to suggest that an individual is claiming Gift Aid contrary the published rules which MSE should be aware of.  
    Have we all read the question incorrectly?
  • Savvy_Sue
    Savvy_Sue Posts: 46,908 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I wonder whether this dilemma has been poorly edited.
    As presented, it appears to suggest that an individual is claiming Gift Aid contrary the published rules which MSE should be aware of.  
    Have we all read the question incorrectly?
    Anything is possible with an MMD, but I do not think the OP is claiming Gift Aid, instead they are giving via GAYE (Give As You Earn) and getting a tax benefit that way.

    So, employee earning £2k pm gross tells employer they wish to donate £50 per month to charity. Instead of paying tax on £2k, e'ee is taxed on £1950.

    In addition, in this case, e'er is matching such donations, so charity receives £100. Note that the charity can't claim Gift Aid on this, because it's GAYE, and coming from an employer, not an individual.

    However, in this particular case, the e'ee is collecting donations from other people, so that their £50 'donation' might consist of £5 from the e'ee and £45 from their friends, AND they're paying less tax, AND getting the e'er to match donations from random individuals.

    Let's just say that if I were administering a GAYE scheme as part of payroll, I'd be suggesting that the e'er should check that the terms were clear, especially if there was any matched giving going on.

    It would of course be different if the e'ee was given a gift for their own personal use, eg £50 for their birthday, and decided to donate that £50 through the GAYE scheme. But this e'ee is NOT being given money for personal use: they are being given donations to pass on to a charity, and they think it's appropriate to reduce their tax liability AND mislead their employer with that money. I don't care how small the sums involved are, it's not how things should be done.
    Signature removed for peace of mind
  • Grumpy_chap
    Grumpy_chap Posts: 17,045 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    Savvy_Sue said:
    I wonder whether this dilemma has been poorly edited.
    As presented, it appears to suggest that an individual is claiming Gift Aid contrary the published rules which MSE should be aware of.  
    Have we all read the question incorrectly?
    Anything is possible with an MMD, but I do not think the OP is claiming Gift Aid, instead they are giving via GAYE (Give As You Earn) and getting a tax benefit that way.

    I am not sure whether the tax rules really differ in this regard between Gift Aid and Payroll Giving.  In both cases, the individual gains tax relief because the individual has sacrificed a part of their income.  Except in this case, the individual has not sacrificed their income at all but replaced it with tax-free money from their friends.

    Both Gift Aid and Payroll Giving can benefit the individual by more than the direct value of the tax relief:
    • Increased entitlement for UC (there was a thread recently where someone donated "several hundred" a month and UC increased as a result)
    • Adjusted ANI, so possible benefits in HICBIC, avoid withdrawal of personal allowance, child care.
    If (as it seems to me) this process is contrary to taxation rules, I would not expect MSE to have presented the MMD.

    The situation with the employer's matched donations is different - one assumes the employer expect this to be the individual's income that is sacrificed and matched.  It is quite possible that this was never explicitly written into the rules as the employer quite probably never imagined the process would be circumvented.
  • Savvy_Sue
    Savvy_Sue Posts: 46,908 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    It is probably my anal tendencies which lead me to differentiate between GA and PG. I completely agree with you that whatever the process, it is contrary to taxation rules. 
    Signature removed for peace of mind
  • IvonH
    IvonH Posts: 22 Forumite
    10 Posts First Anniversary
    You should fill in the gift aid relief form which means your tax goes to the charity as an extra "donation".  Withholding the information and keeping the extra money is downright unethical and equates to stealing in my book.
  • Grumpy_chap
    Grumpy_chap Posts: 17,045 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    Savvy_Sue said:
    It is probably my anal tendencies which lead me to differentiate between GA and PG. I completely agree with you that whatever the process, it is contrary to taxation rules. 
    Thanks.
    It would be nice to have an actual definitive rule that shows this in absolute clarity and certainty, rather than simply two people (at least one of whom is unqualified in these matters) agreeing about it on the internet.
    If this is, indeed, contrary to tax rules, then the whole scenario ceases to be a MMD and should not have been put up as such.  
    Otherwise we might just as well have "Jim realised that if he makes a false declaration on his tax return he can pay far less tax.  Should Jim do this?  What do you think, readers?"

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