Vol. 544 No. 2
88 Mr. P. Carey asked the Minister for Finance if he will examine the operation of a deed of covenant by a school (details supplied) in Dublin 11; if measures introduced in the Finance Act, 2000, will impact negatively on this organisation; and if he will make a statement on the matter. [28323/01]
Last year, I decided to look at the whole area of tax relief for donations. At that time there were 13 different reliefs for donations to various bodies with widely differing qualifying conditions. Having considered the area carefully, I decided to simplify and rationalise various tax reliefs in this area.
Accordingly, as you will be aware, in this year's Finance Act, I introduced a new scheme of tax relief on donations made by either individuals or corporate bodies to certain organisations. These include charities, first and second level schools and third level institutions including universities. For the short tax year 2001, the minimum donation that must be made to a qualifying body is £148 – 185. For the tax year 2002, the minimum donation will be £197 – 250.
The new arrangements for allowing tax relief differ depending on whether the donor is a PAYE taxpayer, a person on self-assessment or a company.
In the case of PAYE taxpayers, the relief is given to the approved body to whom the donation is being made. For example, if an individual who pays income tax at the higher rate – 42% – gives a donation of £580, 737, to an approved body, the body will be deemed to have received £1,000 – 1,270 – less tax of £420 – 533. The approved body claims a refund of the £420 – 533 – from Revenue 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, the individual will claim the relief as a deduction against tax. Similarly, in the case of companies, they can claim the donation as a trading expense. There is therefore no grossing up arrangement as in the case of the PAYE taxpayer.
As part of this simplification process, most of the existing tax reliefs for donations, including covenants for the teaching of the natural sciences in schools, were allowed to lapse. I should point out that, in the case of covenants to second level schools, while there was no minimum amount, these donations could only be used for the teaching of the natural sciences. The new scheme has no such restriction. Furthermore, there is no upper limit on the amount which can be donated and, as indicated earlier, the tax relief is available at an individual's marginal rate of tax. It is also noteworthy that donations can be cumulative over a tax period and thus a weekly donation of, for example, £4 – 5 – would qualify.
Finally, I would point out that during the passage of the Finance Bill this year through Dáil Éireann, I introduced an amendment which reduced the minimum contribution under the scheme. Overall, the new scheme represents a significant and generous improvement on the various reliefs which it replaced. I have, however, noted the Deputy's concerns in this matter and will bear them in mind in the context of the forthcoming Budget and Finance Bill.
