Lack of entrepreneur awareness about tax relief means charities are missing out on donations, according to new research from PricewaterhouseCoopers (PwC).
Current regulations mean that for every pound a UK taxpayer donates, an additional 28p is given to the charity by Gift Aid.
However, changes in legislation mean that from April 2008, charities will only be able to reclaim 25p in every pound – although small, this decrease will result in an 11% drop in tax repayments to charities.
Kevin Nicholson, tax partner at PwC said: “Having achieved their business objectives, many entrepreneurs often look to their local community to give something back. There are many ways to give to charity but it is important to ensure that donations are made in the most tax efficient way to maximise the benefit for all concerned.”
Though Gift Aid is the most familiar form of tax effective donation, many entrepreneurs are unaware that that they can give gifts of land, buildings, share and securities which are all free from capital gains tax.
However, HM Revenue and Customs (HMRC) have introduced new laws that will prevent these gifts from abuse by donors.
Nicholson explained: “The gift of a building of which the donor intended subsequently to make use of rent free on an occasional basis might well leave the charity with an unintended and unexpected tax bill.
“While there is plenty of scope to maximise tax relief on charitable gifts, even greater care now needs to be given to the planning – the rules are widely drawn and may catch the unwary charity and business out,” he added.
© Crimson Business Ltd. 2007
