Philanthropy and Tax
Mike Gaffney, KPMG and CFI Board Member and Jackie Harrison, Head of Fund Development, The Community Foundation for Ireland talk about philanthropy and tax
Tax Relief on Donations
We are an independent registered charity and as such contributions may be eligible for a tax deduction or eligible income tax relief may accrue to the donation depending on the circumstances of the donor. The Revenue Commissioners have summarised the Scheme of Tax Relief for Donations to eligible charities and other approved bodies, under section 848A, Taxes Consolidation Act 1997. Note: The Minister for Finance introduced changes to the Donation scheme operated in accordance with s848A in Budget 2013. These changes are applicable to donations from January 1, 2013 and are reflected as appropriately below.
For advice in relation to tax, we recommend you consult a professional tax adviser. Below is a summary of the main tax relief on donations to charity:
Tax relief on donations to charity
Key Features of the Revised Scheme in relation to tax relief on donations to charity:
- Tax relief in respect of donations made on or after 1 January 2013 by individuals (whether elf-assessed or PAYE-only taxpayers) to an approved body is allowed to the approved body rather than to the donor at a blended rate of 31%;
- An annual limit of 1million per individual can be relieved under the revised scheme and donations under the scheme are no longer subject to the higher earner restriction;
- In the case of a donor who is “associated” with the charity (employee, board member, member etc.) the limit for tax relief on donations to a maximum of 10% of annual income continues to apply;
- In the case of a donor advised fund at The Community Foundation for Ireland, the tax relief will accrue directly to the fund. For example, a donor makes a donation of 10,000 to their donor advised fund. If eligible, the tax relief, grossed up at 31% on that donation will accrue directly to the donor’s fund (once it has been claimed back from the Revenue Commissioners) resulting in a revised balance of 14,493 in that fund to disperse to charitable causes.
Corporate donations If a company donates to an approved charity, the donation can be treated as a trading expense (subject to a minimum donation per charity of 250), and so will be deductible for corporation tax.
Donating shares (plc)
In 2005, income tax relief was introduced for the donation of publicly-quoted shares to eligible charities. Those giving gifts of publicly quoted shares (of 250 or more) have to choose between an Income Tax relief and capital Gains Tax (CGT) relief. If income tax is chosen, the procedures are the same as for cash donations. If the donor opts for CGT relief, the sale of the shares will be treated as a ‘no profit no loss’ sale i.e. it is treated as if the shares were sold for exactly the same price as was paid for them.
Donating shares (private company)
A donor may still decide to donate shares in a private company to a charity. However, unlike in the case of publicly quoted shares, the charity (for example, The Community Foundation for Ireland) would arrange for sale of the shares in order to realise their value. Similar to donating any other asset to charity or to a philanthropic organisation, the donor will be treated as if he/she did not make a profit or loss on the transfer of the asset. As long as the proceeds are used for charitable purposes, the recipient charity will not have to pay either CGT when it sells the asset, or any form of Capital Acquisition Tax (i.e. Gift or Inheritance Tax) on the original gift of the set.
Please contact your professional adviser or CFI with any queries.
Trans Giving Europe
Since 2006, we have been the Irish representative of Transnational Giving Europe (TGE) which enables philanthropy across Europe. TGE is a practical and secure solution for tax-effective cross-border cash donations. The TGE network covers 19 countries and enables donors, both corporations and individuals, resident in one of the participating countries, to financially support non-profit organisations in other Member States, while benefiting directly from the tax advantages provided for in the legislation of their country of residence. For additional information on Trans Giving Europe, please contact Helen Beatty on firstname.lastname@example.org
If you would like any additional information on any of the above please contact Jackie Harrison on email@example.com or 01 8747354