13 Jan 2014, 7:04pm
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  • Dividend tax credits count for Gift Aid

    Note – to avoid potential confusion while dividend tax credits are ‘paid by’ the Government, this is credit for taxes already paid on dividends. High-level view here, detailed HMRC lowdown here. They are nothing to do with what many people know of as ‘Tax Credits‘ in the UK

    HMRC seem to have been messing about with the Gift Aid system whereby charities could reclaim some of the basic rate tax that people pay on their income, or indeed Capital Gains Tax for those people who are fortunate enough/screwed up somewhere to pay it. Seems to be to the detriment of all concerned – you now have to give something over and above the cost of entry. I blanked Gift Aid for the National Trust Roman Villa I visited way back, because I was under the impression as an impecunious Ermine with zero income I don’t get to claim Gift Aid, natch, and so seven degrees of Hell would break out should HMRC check. I was also being a tight bastard and didn’t like the heavy upsell for the ‘additional donation so we can giftaid it’.

    SWT don't actually deliver wildife to me personally, so subs can be giftaided without increase, unlike the National Trust entry, which is considered services rendered by HMRC

    Suffolk Wildlife Trust don’t actually deliver wildlife to me personally, so SWT subs can be giftaided without increase, unlike the National Trust entry, which is considered services rendered by HMRC

    I’ve already checked the ‘I am not a taxpayer’ box on the Gift Aid declaration for Suffolk Wildlife Trust along the same principles 1, but another organisation sent me a ‘check your Gift Aid status’ just now and I figured it was time to get some facts behind my assumption with the NT that

    I can’t really fill in the giftaid ticket with integrity, as a non-taxpayer though I doubt HMRC tests them

    And it appears that I was wrong. In RE1835 – Gift Aid relief: the requirement to pay tax HMRC speak thusly:

    The individual must have paid at least as much income tax and/or capital gains tax (at any rate) as the basic rate tax the charity will reclaim on the Gift Aid donation, for the year of the donation. Tax deducted from investment income, including dividend tax credits, can be used to cover donations.

    They also repeat themselves here

    Making sure you’ve paid enough tax to use Gift Aid

    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[…], you will need to consider the tax you’ve paid on each donation on an accumulative basis. If you don’t pay enough tax you will need to pay any shortfall in tax to HMRC.

    You don’t necessarily have to be working to be paying tax. Apart from tax on income from a job or self-employment, the tax you’ve paid could include:

    • tax deducted at source from savings interest – nope – in R85 I trust
    • tax on State Pension and/or other pensions – nope – no pension no dice
    • tax on investment or rental income (including tax credits on UK dividends) – BINGO
    • Capital Gains Tax on gains – nope – I don’t do CGT and take steps to avoid incurring it.

    Other taxes such as VAT and Council tax do not qualify, nor does any non-UK tax.

    Dividend tax credits, eh? Now you can argue that you still pay the 10% tax on dividends inside an ISA 2, though there’s no need for a dividend tax credit ticket because ISA income isn’t declarable. I wouldn’t push the point – the value of Gift Aid for my involvement with charity isn’t world-changing enough to take the risk. In general you don’t pick a fight with HMRC unless you have a really good reason to 😉

    However, I hold significant unwrapped holdings, easily enough for 10% of the divi 3 to match 25% of my contribution to charity, so when these letters/subs come round over the year it appears I will be able to fill in the Gift Aid checkbox with a clear conscience. Obviously that is as long as I have unwrapped annual dividend income 0f 10/4 = 2.5 times my total annual charitable subscriptions. I’m okay on that, and I can now stop ticking the ‘skivers’ box on those giftaid forms, and redirect some of my hard-earned non-income away from HMRC with their blessing. What’s not to like?


    1. Gift Aid it’s a lot easier with charity subscriptions, since the services they deliver aren’t specifically delivered to me, so the subs can be giftaided for no extra cost. It’s not like SWT come round and deliver a box of screeching barn owls in return for my payment, whereas with the NT it was a straight payment for access
    2. You still only get 90% of the dividends – you don’t get any more than if you held them unwrapped, but you have no further tax liability even if you are a HRT payer
    3. to be exact it’s a little bit more as it’s 10% of the whole dividend of which you only see 90%, but 10% of the dividend you get in your bank account is a good enough rule of thumb and fails safe in HMRC’s favour
    15 Jan 2014, 11:57am
    by Jonathan of Cambridge


    Useful information — I wasn’t even aware that CGT payments qualify for GiftAid offsetting, let alone divident tax credits.

    More scary, nor was I aware of this, which you quote from HMRC: “If you don’t pay enough tax you will need to pay any shortfall in tax to HMRC.”

    I’d always presumed that the charity would have its tax-refund cut back, not that the donor would be pursued for the balance.

    MOre generally, I’d presumed that it would be cost-effective for HMRC to investigate a sample of a charity’s donor’s GiftAid-eligibilty claims, then reduce the charity’s overall tax refund by the proportion of ineligibles in that sample. Pursuing donors to make up the missing revenue rather than simply not handing it over to the charit in the first place sounds very costly to implement.

    15 Jan 2014, 11:59am
    by Jonathan of Cambridge


    Ugh, bad apostrophe, sorry.

    Was “… for HMRC to investigate a sample of a charity’s donor’s GiftAid-eligibilty claims …”

    Should be: “… for HMRC to investigate a sample of a charity’s donors’ GiftAid-eligibilty claims …”

    @Jonathan I salute your dedication to the residual genitive in English and its plural 🙂

    I made the same assumption as you that HMRC would sample this. The costs of chasing the odd three or four quid here and there on a typical subs of ~£30 to £50 seem nuts.

    I’d also made the assumption that low-income donors would be scarce, but it appears that this is wrong in the US and also in the UK which is a curious little factoid I learned today, but may explain HMRC’s wariness. Still seems a bit cheap of them to go hounding the skint though!


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