Gift Aid is a very important component of the finances of many charities. Provided that they have clear evidence of the donations, it is currently possible for charities to claim tax on gift aided donation for up to six back years. Some charities word gift aid declarations to this effect.

Widespread changes are being made to all tax time limits on 1 April 2010 and this will affect gift aid claims. The basic time limit for gift aid claims will now be four years after the end of the tax year in which the donation was received. The change will happen immediately on 1 April and will directly affect two tax years where charities may think they have more time to make claims.

• Under the old rule claims for 2004/05 would have had a time limit of 31 January 2011. Under the new rule the time limit for that year will run out on 31 March 2010 because from 1 April 2010 any claim would be out of date because the new time limit (four years from the end of the tax year) would have expired on 5 April 2009.
• Similarly under the old rule claims for 2005/06 could have been made until 31 January 2012. The new time limit means that four years from the end of the tax year will be 5 April 2010 and that is the date by which claims need to be made.

Comment on charities and gift aid claims - changing times limits in the space provided below, or visit my profile for details of how to contact me. 

Wendy Bambrick is a charities expert and a senior manager at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Wendy you can call her on 01727 869141. 

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I was asked recently for advice by a client, a 40% taxpayer. He wanted to make a substantial donation to charity, funded by the sale of an investment property. The property had a market value of £100,000 and the cost was £20,000.

Basically he had two choices : gift cash, or gift the property.

If he sold the property and gifted the funds to charity the position would be:

• Tax on the disposal £32,000, i.e. 40% x (£100,000 - £20,000). This assumes no taper relief is available
• Net £68,000 available to donate
• A qualifying donation of £87,179 (£68,000 x 100/78)
• Higher rate tax relief £15,692, i.e. £87,179 x 18% (40% - 22%) provided he has sufficient taxable income
• The charity would reclaim the basic rate tax of £19,168 (£87,129 x 22%) from HMRC

 If he gave the property instead the position would be: 

• Income tax relief of £40,000, i.e. £100,000 x 40%
• Charity receives a property worth £100,000, which it could then sell.
• No CGT charge on the charity
• No CGT charge on my client.
  

By giving the property itself rather than selling and giving the cash my client was £24,308 better off and the charity £12,871 better off (£100,000 - £87,179).

If taper relief at full rates had been available (and my client had enough income the result would reverse and a sale and cash gift would be better.

This is not easy – but it is always worth checking.

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