Gift giving and tax implications

[ASB]

Mailman,

You can find out on the IR Webtulipe. But as you say it's hard work.

From a point of view of gifts there are a number of aspects to consider.

In terms of the recipient there are generally no tax consequences.

An exception to this is if the gift is in exchange for something. Then it's income. [e.g. David Mills' apparent payment from some random italian]. Another exception is if the gift is regular. Then it is possible for this to be classified as income. Neither of these are likely to be the case for you.

In terms of the donor then it depend if they are treated for tax as an individual or as a corporate. You don't say whic applies so I'll try and cover both.

As an individual it depends if the gift is from income or capital. If it is from income then generally there are no tax consequences, however it must be demonstated that it is from income and that it is in fact from "excess" income. Otherwise it is treated as a gift from capital.

From capital it is possible to give 1500 to any individual without tax consequences. Othewsie it is a "potentially exempt transfer". In this case it can be added back onto the estate of the donor (harly relevant for this) and subjected to IHT. There are higher limits for cetain life events of the donor (e.g. wedding).

As a body corporate the question is whether it is a chargeable expense. Generally this will be, but their are circumstances where it is not. e.g. donation to family member etc.

I am assuming that it is not a registered charity.

Don't think of the above as definitive, but there is a reasonable chance that you can use to track down chapter and verse on the IR's site.

[Mailman]

Let me see if I can make it a bit clearer about the status of the group Im talking about.

Firstly, we are a registered charity and that all of our income is derived from donations and fund raising efforts.

Secondly, where we give donations would be in the following situations;

1. Member of charity has a death in the family. The current rules of the charity allows up to £50 to be given either in cash or as flowers etc.

2. Member of charity has baby or gets married. A donation would be made either in the form of cash or a present.

3. There are cases where we may give a donation to a group (either a company, body of students, another charity etc) but this would take the following form;

for example, a) lets say our group is involved in cleaning up a war memorial to people killed in NZ during the land wars of the 18th century. A archeology class from London University comes with us to help clean up the memorial. At the end of the day we might give the university a £50 donation as a thank you for your help gesture. No charge would be made by the students to attend to cleaning the memorial with us.

b) Lets say an education group comes to work with children of our members (say from the Science Museum) and they dont charge us for this. At the end of the day we might give them a £100 donation as a thank you gesture.

These are the types of situations where we would be donating money.

Regards

Mailman

[Mailman]

to clarify where groups come to us.

There is no expectation that we would be paying them for their services as they are giving their time to us. When we give them something its only as a goodwill gesture (or a token of our appreciation).

Regards

Mailman

[ASB]

Mailman,

Where the recipient is an individual there should be no consequences on them. Where it is an organization then it would be treated in the same way as any of their other income. A lot of the time I imagine you will in fact be donating to another charity from the description you give, so consider whether you might be able to improve this by Gift Aid (I expect not though as you are a registered charity yourselves).

From the point of view of yourselves you have an exemption from taxation on most forms of income. It is income your are taxed on.

Donations you make are expenses. They may or may not be chargeable against income. I don't know - but I rather imagine they are. In any event since the income is statutorily exempt it will make no difference to the tax you pay. Thus the point is probably moot

The charities commission wil very easily give you chapter and verse I am sure. As will HMRC phone helpline (although it's often sensible to ask them the same questions twice to see if you get the same answers.... )

You might also check this:

http://www.hmrc.gov.uk/charities/gui.../chapter_2.htm
http://www.hmrc.gov.uk/charities/gui...x1/annex_i.htm

[Mailman]

Excellent, thanks very much ASB.

Regards

Mailman