Skip the primary navigation if you do not want to read it as the next section.
Skip the main content if you do not want to read it as the next section.
By Philanthropy UK
Highlights
- Individuals and companies can claim tax relief when giving certain assets to a UK charity.
- Companies may receive tax relief for gifts of items manufactured or sold, or on machinery or plant used, in the course of their trade.
- Sharegift specialises in helping donors give small lots of shares to charity.
_________________________________
Individuals and companies can claim tax relief when giving certain assets, such as shares and land, to a UK charity. Outright gifts are also free of inheritance tax. Unlike cash donations under Gift Aid, all the tax relief is claimed by the donor.
The amount of tax relief you are eligible for involves two elements: Capital Gains tax relief and Income tax/Corporation tax relief.
Capital Gains tax relief
If you make an outright gift of assets to a UK charity, or if you sell the asset to the charity for an amount less than you originally paid for it, then the disposal is treated as having been made on a no gain, no loss basis for Capital Gains tax purposes. This can be an effective relief for the taxpayer because they are not subject to Capital Gains tax on any chargeable gain arising on the disposal of the asset.
However, if the charity buys the asset for more than you originally paid, then you incur a capital gain based on the amount the charity actually pays you.
Income tax/Corporation tax relief
You may also be entitled to income tax/corporation tax relief if the assets are qualifying investments.
The amount of relief which is allowable as a deduction against income, thereby generating tax relief, is the market value of the qualifying investments at the date of the gift, less any consideration given by the charity, plus any incidental costs of making the gift. The relief on a sale of assets is the difference between the open market value and the price paid by the charity. Please note that the relief is reduced if the donor receives any benefit as a result of the disposal.
To give land or property, you must transfer the whole of your interest in the asset to the charity. This means that you cannot give a building to a charity and continue to live in it. Nor can you give land and continue to access that property.
Qualifying investments
- Shares and securities listed or dealt in on the UK or another recognised stock exchange
- Units in an authorised unit trust (AUT)
- Shares in a UK open-ended investment company (OEIC)
- Holdings in certain foreign collective investment schemes – broadly, schemes established outside the UK that are similar to unit trusts and OEICs
- A qualifying interest in land and buildings in the UK
Note that a company cannot get relief for a gift of its own shares.
Example 1You own a holiday home and decide to give it to a UK charity. A qualified agent values the property at £250,000 and charges £500 for the valuation. As a token of appreciation, the charity gives you a painting worth £1,500. To calculate the tax relief, you add together the value of the property and any incidental costs (the agent’s fees), and subtract the value of any benefit received (the painting). Value of property: £250,000 So you can deduct £249,000 from your total taxable income for the tax year in which you made the gift. |
Example 2You are a higher-rate tax payer and give a UK charity shares worth £10,000 that cost you nothing. If you had sold the shares yourself, you would have received £10,000 but paid £1,800 capital gains tax (at 18% assuming no annual exemption), for a net gain of £8,200. By giving sharers to the charity instead you would receive the following tax reliefs. Capital gains tax 18% of £10,000 = £1,800 So, in this case, the total saving is worth £5,800 (ignoring broker’s fees). This means that a gift with an after-tax cost to you of £4,200 would be worth £10,000 to the charity, and that is the size of the gift you would be recognised for. |
Example 3A higher-rate tax payer, you give shares worth £10,000 that cost you £5,000. You would save capital gains tax on the £5,000 gain – that is, £900 (18% of £5,000). Also, as in Example 2 above, you would benefit by £4,000 income tax relief on the whole value of the gift. So in this case the total tax relief is £4,900 and the net cost to you of a £10,000 gift is £5,100. |
Advantages to donors
For some affluent donors, giving shares rather than cash could allow them to be more generous because of the higher tax relief. You may have shares in a company or sector that is no longer part of your main portfolio and be willing to donate them to a charity. Or you may have a significant holding of shares and want to support a particular charity at a time when your cash flow might not support a cash gift.
You may have small shareholdings that may cost more to sell than they are worth, yet you still have to fill in parts of a self-assessment tax return for these investments.
If you have small shareholdings and want someone else to manage your donations, there are two options. You could donate the shares (at least £500) to a donor-advised fund, such as the Charities Aid Foundation (CAF), Stewardship, or your local community foundation – all of which are registered charities. For a small fee, they will then distribute the proceeds to one or more registered charities chosen by you.
Another approach is to give the shares to Sharegift. This is a registered charity which specialises in helping donors give shares to charity. They accept any number of shares and collect them until there are enough to sell. They make donations to charities that have been suggested by share donors. They do not charge for this service.
Companies and businesses
Companies may receive tax relief for gifts of items manufactured or sold, or on machinery or plant used, in the course of their trade. To be eligible, the business must be a trading company, a sole trader, or a trading partnership. The tax relief is given on the cost of manufacture/purchase of the items manufactured/sold; i.e., relief is not given on their usual sale price.
In the case of machinery or plant used in the course of your trade, treat it as having been disposed of at nil value for capital allowances purposes (rather than at market value, as would otherwise be the case). The total capital allowances given to you in respect of the article will be equal to its cost.
How to gift shares directly to a charity
First you should contact the charity to confirm that it can accept your gift.
If your shares are held in paper form (share certificates) you need a stock transfer form. Either the charity or your broker or the company registrar will provide this. The details of the registrar will be on the share certificate, dividend voucher, annual report or website.
- When you have filled in this form, send it to the company register with your share certificates. You should make sure you include the full name and address of the charity. The company will then issue a new share certificate in the name of charity.
If your shares are held in a nominee account and the charity has a nominee account, you must have the name and contact details of the person who handles the nominee account, the account details and the charity name and registration number.
- You should then instruct your broker to arrange for your shares to be transferred into the charity’s nominee account.
- If the charity does not have a nominee account, you will have to arrange to withdraw the shares from your nominee account and for a share certificate to be produced. Your broker or advisor can arrange this. There may be a charge, but you can include any fees or charges in the cost of the donation and receive tax relief on this.
If the charity asks you to sell the shares on their behalf, you must make sure you have proof that you have given shares and not the proceeds from the sale of the shares. You must keep written evidence (a signed and dated letter of your intentions) that shows you have given shares and the charity has then asked you to sell the shares on their behalf. The date of the sale must be later than the date of the gift. Without evidence you may be treated as having made the sale on your own account. As a result, you will not be eligible for income tax relief and may also have to pay capital gains tax (although the sales proceeds could be donated under Gift Aid).
If the charity offers a gift in return (for example, tickets to an event), the total value of the gift would be taken from the value of the donation before working out income tax relief.
To claim relief, you can either complete a Self Assessment tax return or, if you pay tax through PAYE (Pay As You Earn), you can contact your tax office. You can only claim income tax relief for the tax year in which you make the gift.
There are no special forms to complete, but you should keep the following records:
- Share transfer documents
- A certificate from the charity that confirms the asset has been transferred to them
- Any written request from a charity to sell the asset on its behalf
As with all schemes involving income tax relief, your yearly income tax and capital gains tax must be at least as much as the value of the gift to obtain the full income tax benefit. Every donor’s situation will be different and we strongly recommend that you consult your accountant or financial advisor.
© Copyright 2009 Association of Charitable Foundations (ACF)
Every effort has been made to ensure that the information provided in A Guide to Giving is current at the time of publication (December 2009), but the Association of Charitable Foundations (ACF) cannot guarantee its accuracy. Furthermore, there may have been subsequent changes to legislation, policy and/or to tax bands and rates. If you are considering any investment you should seek appropriate professional advice. This guide is not intended to replace professional advice on particular investments or the manner in which tax relief is applied under any scheme, and you should not rely on it for such purposes. You are responsible for your own tax and financial affairs and so should seek independent advice. ACF can not accept responsibility for the investment choices you make.
Views expressed in A Guide to Giving are not necessarily those of Philanthropy UK or the Association of Charitable Foundations.
Coutts & Co is not responsible for the content of A Guide to Giving, and the content does not constitute any advice whatsoever from Coutts & Co. The case studies and profiles within the Guide are not necessarily clients of Coutts & Co. Coutts & Co shall not be liable for any loss whatsoever arising from your reliance on any information produced in the Guide.
