Tax relief is available in respect of donations made by either individuals or corporate bodies to eligible charities and other approved bodies, including first and second level schools and third level institutions, including universities. An eligible charity for the purpose of tax relief on donations is any charity in the State which has been authorised by the Revenue Commissioners as an eligible charity and which holds charitable exempt status from the Revenue Commissioners for at least three years.
The minimum qualifying donation for relief purposes to any one eligible charity or approved body is €250 per annum. There is no upper limit on the amount which can be donated generally and qualify for relief. Donations must be in the form of money and donations for any one year can be on a cumulative basis. A weekly donation of €5 per week can therefore qualify for the relief. The relief on the donation is at the individual's marginal rate of tax.
The arrangements for allowing tax relief on donations, which are provided for in section 848A of the Taxes Consolidation Act 1997, depend on whether the donor is a PAYE taxpayer or an individual on self-assessment, or a company. For a PAYE taxpayer, the relief is given on a "grossed-up" basis to the approved body rather than by way of a separate claim to tax relief by the donor. For example, if an individual who pays income tax at the higher rate of 42% gives a donation of €580 to an approved body, the body will be deemed to have received €1,000 less tax of €420. The approved body will, therefore, be able to claim a refund of €420 from the Revenue Commissioners at the end of the tax year. Similarly, if a standard rate taxpayer makes a donation of €800 to an approved body, the approved body will be able to claim a refund of €200 from the Revenue Commissioners at the end of the tax year.
In the case of a donation made by an individual who pays tax on a self-assessment basis and by companies, it is the donor and not the recipient of the donation who claims the relief. In the case of an individual, the donation can be claimed as a deduction against the individual's income from all sources. In the case of companies, the donation is effectively treated as an ordinary business expense which is deductible in determining the company's tax liability. The claim to the relief is made with the individual's or company's normal tax return. Any refund of tax arising by virtue of the donation is repayable to the donor and not to the eligible charity. There is, of course, the presumption that the potential donor will be aware of the tax relief available and that the level of the donation will reflect that knowledge.
Some taxpayers, however, are chargeable persons for the purposes of self-assessment but also pay tax under the PAYE system. These taxpayers must claim the tax relief on their donation through their tax return in common with all self-assessed taxpayers. They cannot be included in claims being made by charities in respect of wholly PAYE taxpayers. To do so would be to grant the relief twice. I am advised by the Revenue Commissioners that this particular aspect of the scheme has resulted in some difficulties for charities in compiling claims for repayment. Frequently, such claims include donors who have had a mix of PAYE and self-assessed income for the year, a fact not known to the claiming bodies and as a result incorrect claims have had to be reduced in a number of cases.
I am advised by the Revenue Commissioners that, in general, the arrangements work reasonably well and, therefore, I am not convinced that a change to the scheme along the lines implied by the Deputy's question is warranted at this stage. Full details of the tax relief scheme, including details on how to claim the relief, are set out in the information booklet CHY2, a copy of which will be sent to the Deputy. The details are also available on the Revenue Commissioners' website at www.revenue.ie.
