DRIVING to a meeting last week I had the Today programme on the radio.
It was the usual mix of news and politics and I can’t honestly say that I was paying much attention until I heard Geraldine O’Hara’s voice.
Dr O’Hara works for the charity Medecins Sans Frontieres in Sierra Leone treating ebola cases.
Her words were so matter of fact yet so powerful that I stopped the car to listen.
Why am I telling you this in a column about tax?
Because the tax system offers some significant incentives to donate to charities. Some of these reliefs are well known, but others are not.
Most people know about Gift Aid, through which HMRC ‘tops up’ a cash gift to a charity and also gives extra tax relief to donors who pay higher rate tax.
For example a gift of £80 under Gift Aid is treated as a gift of £100 with HMRC giving the charity the extra £20.
If the donor pays tax at 40% they obtain a further £20 tax relief personally through their tax return and if they pay at 45% this rises to £25.
A 60% taxpayer (yes, there is a 60% rate) will be given a further £40 so that for a net cash outlay of £40 the charity will receive £100.
Fewer people know that they can obtain tax relief on gifts of certain shares or of land and buildings.
The market value at the date of gift is treated as a deduction for income tax and there is no capital gains tax to pay.
Anything you leave to charity in your will is exempt from inheritance tax and leaving at least 10% of your estate to charity can reduce the inheritance tax rate chargeable on the remainder of your estate from 40% to 36%.
The calculations can sometimes be complicated but the relief is an important one. Even if the will does not provide for a qualifying gift it might be possible to legally vary the will after death to secure the relief.
You can listen to Geraldine O’Hara’s audio diary on the BBC Radio 4 website. It inspired me and I hope it may inspire you too. The work she and her colleagues are doing is beyond words.
Even the tax system can give a helping hand.
*Paul Aplin OBE is a tax partner with A C Mole & Sons and chairman of the Technical Committee of the Institute of Chartered Accountants in England & Wales Tax Faculty; you can follow him on Twitter @PaulAplinOnTax. He and fellow tax partners Amanda Gunter and Paul Kingdom can be contacted on 01823-624450.
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