1 - Income Tax (E)

Question 1

What are the 3 main tax-efficient ways of making financial donations to UK charities?

Answer 1

• gift aid;
• payroll giving; and
• gifts of certain assets.

Question 2

Why should non-taxpayers avoid using gift aid?

Answer 2

Gift aid will give tax relief that they are not entitled to, and they will have to pay the excess deducted from the donation to HMRC

Question 3

Name 6 assets you can gift to charity and get income tax relief on

Answer 3

• listed shares and securities;
• unlisted shares and securities dealt on a recognised stock exchange, such as AIM;
• units in authorised unit trusts;
• shares in OEICs;
• holdings in foreign collective investment schemes; and
• any freehold or leasehold property provided the whole interest is given.

Question 4

What is the gift aid amount?

Answer 4

25% of your donation

Question 5

How does gift aid work?

Answer 5

Taxpayer makes donation and selects gift aid, government put in an extra 25%, charity claim the 25% gift aid, in addition to your donation

Question 6

What is the purpose of gift aid?

Answer 6

Encourage charitable giving by giving tax relief for donations

Question 7

Explain how a higher rate taxpayer can claim more gift aid.

Answer 7

Example: they donate £100 to charity - they claim Gift Aid to make your donation £125. They pay 40% tax so they can personally claim back £25.00 (£125 x 20%).

Question 8

What is payroll giving?

Answer 8

Where employees can make regular gifts to charity of any amount in a tax-efficient manner through
their employer’s payroll system.

Question 9

Are charitable gifts through payroll giving deducted before or after tax?

Answer 9

Before

Question 10

Donations made using payroll giving are shown on a tax return and included in a tax computation. True or fale?

Answer 10

False, they are not

Question 11

What are the minimum and maximum payment amounts under payroll giving?

Answer 11

None, unlimited

Question 12

How can you donate to a community amateur sports club (CASC)?

Answer 12

Gift aid, but not payroll giving

Question 13

Individuals can benefit from tax relief for gifts of pre-eminent objects to the nation. What is the rate of reduction?

Answer 13

Equivalent to 30% of the value of the object

Question 14

How can gifting pre-eminent objects to the nation affect a company’s corporation tax liability positively?

Answer 14

The provisions for gifts of pre-eminent objects to the nation by companies give a reduction in a company’s corporation tax liability of 20 per cent of the agreed value of the gift.

Question 15

What is the CGT and IHT position on gifting pre-eminent objects to the nation?

Answer 15

Gifts under the scheme are exempt from capital gains tax and inheritance tax.

Question 16

The tax reduction from gifting pre-eminent objects to the nation, can be used against the individual’s income tax and/or CGT liabilities, and can be spread forward over a period of up to how long?

Answer 16

5 years, and this must be specified in advance