Sorry, but I just don't understand how millionaire earners can make charitable donations, claim tax relief on them and be better off, which is what's implied by the latest furore.
From the HMRC's own website:
Claiming back higher rate tax
If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 and/or 50 per cent and the basic rate of tax 20 per cent on the total 'gross' value of your donation to the charity or CASC.
For example, if you donate £100, the total value of your donation to the charity is £125 - so you can claim back:
- £25 - if you pay tax at 40 per cent (£125 × 20%)
- £37.50 - if you pay tax at 50 per cent (£125 × 20%) plus (£125 × 10%)
So, no matter how you look at it, you're worse off than if paying higher rate tax on the amount - unless you are the charity. Am I missing something? As I see it, philanthropists who make large donations give away far, far more than they could ever claim in tax relief. What they are doing, however, is getting the government to put tax money into charities alongside their loss-making donations.
What I think the government should do is to have a closer look at what constitutes a charity.