Thursday, 12 April 2012

Sorry, I Just Don't Get It


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.


6 comments:

  1. CB, The logic goes like this: If you can afford to give that much away then you can afford to pay more tax...

    Totally agree about tougher rules for charities, religions for starters.

    ReplyDelete
  2. By claiming tax relief on the donation you are (the bloody rich are) putting less into the taxation pot which effectively means that all those who potentially benefit from the taxation pot are being short changed. Thus tax-payers as a whole are subsidising the donation : a donation which is given without their approval and not in their name. Why should I be forced to contribute (by paying more tax to make up the shortfall) to the Donkey Sanctuary. I don't like donkeys.

    ReplyDelete
    Replies
    1. Alan: I always suspected you were a heartless donkey hater at heart.... Do you eat horse flesh?

      Delete
    2. PS - while your point is entirely valid, it does not detract from the manner in which the government slyly is portraying it - as a lucrative tax loophole for rich people to benefit from. They don't benefit - unless, as I said, they are the charity.

      Delete
    3. PPS - just had a word with the people down at the donkey sanctuary, and they're coming for you...

      Delete
  3. What happened to 'Badger's Rest' for a name for the beautiful hovel?!

    I wholly agree about some charities - there seems to be a charity for practically everything and many seem to duplicate others, which is so wrong, while many flounder without adequate support - I used to work (briefly and voluntarily) for a very worthy young people's charity - Dealing with sexual and emotional health issues, it wasn't dead popular, as most people seem to expect YPs to be angels, not sinners...

    It struggled to survive last year, with practically nothing to replace it - Therefore there would have been more teen pregnancies, mental health crises, and so on... If it ain't sexy, it doesn't cut the mustard, it seems. Sad.

    ReplyDelete