Question of Finance: What tax relief can be claimed on donations?
Q I'm looking to make a donation to charity and I am aware there is some sort of tax relief that can be claimed, but I'm unsure of the details. Can you advise me?
A In order to qualify for tax relief, the minimum donation to an approved charity (an eligible charity is one which has been authorised by the Revenue Commissioners) is €250.
How the tax relief is paid depends on whether you are a PAYE worker or self-employed.
If you are a PAYE worker, the charity reclaims the tax paid on your behalf. If you are on the standard rate of tax and you donate €1,000, the value to the charity is €1,250. This increases to €1,695 if you are on the higher rate of tax.
In order for the charity to reclaim the PAYE tax paid to the Revenue Commissioners, the donor completes a CHY-2 Certificate and provides it to the charity, which does the rest.
A point to note is that not all charities are set up to reclaim the tax back. So, when discussing your gift with the charity, you should make sure that they will reclaim the tax.
The difference if you are self-employed is that you claim back the tax yourself in your tax return.
In the case of a self-employed person on the standard rate of tax who donates €1,000 to charity, the Revenue Commissioners will return €250 directly to the donor. However, if you are a high-earner, ie earning over €125,000, the relief you receive may be restricted if you have too many other tax reliefs to deduct from your income.
With corporate donations, a company can treat them as though they are a trading expense, claiming tax relief at the corporation tax rate of 12.5pc.
If you intend to make a regular monthly donation, the accumulated amount for any one year will attract the relief as long as it is in excess of €250.
- Jeremy Mitchell, director, Astons Tax & Wealth Consultants.