What is an “Eligible Charity”?
The tax relief detailed above is only available for donations to Eligible Charities or Approved Bodies. An Eligible Charity is defined by the legislation as any charity within the State, which is authorised in writing by the Revenue Commissioners for the purpose of this Scheme. In order to qualify for eligible charity status, the charitable organisation:
- must have a charitable tax exemption number or CHY No. and
- must have been in operation for at least three years since being granted the CHY No.
- must make a formal application to Revenue on the form provided Form of application to Revenue for Authorisation as an “Eligible Charity” for the purposes of Section 45, Finance Act, 2001 (donations to eligible charities).
- must meet any other conditions that Revenue may require from time to time
Authorisations issued under the scheme will be valid for periods ranging up to five years and can be renewed upon expiry by completing a fresh application.
Approved Bodies are educational and other named organisations details of which are available on the Revenue website.
Does AHAR Ireland qualify as an “Eligible Charity”?
Currently no. AHAR Ireland was granted it’s CHY No. in late 2013 which means we have to wait until late 2016 before we qualify.
About the scheme
From April 2001 tax relief has been available on donations of €250 or more in any one tax year to eligible charities from both individual and corporate donors. Tax relief is applied to these donations at the donor’s marginal rate of tax.
How the tax relief is applied depends on which taxpaying category the donor falls into:
1. In the case of PAYE taxpayers, the tax relief is applied at the marginal rate and is paid directly by the Revenue Commissioners to the Eligible Charity or Approved Body on receipt of the relevant appropriate certificate (an official form that is completed by the donor and the charity receiving the donation).
2. Individual taxpayers on self-assessment benefit directly from relief at the marginal rate by claiming the donation as a tax-deductible expense.
3. Corporate donors simply claim a deduction for the donation as if it were a trading expense.
So in the first case the tax relief is paid directly to the Charity whilst in cases two and three the donor receives the tax relief. The following examples will help to illustrate how the tax relief works in practice.
Who Claims the Tax Relief?
Example 1 PAYE Donor
Tom is a PAYE taxpayer who donates €250 to his favourite eligible charity. His marginal rate of tax is 41%. Tom fills in a form sent to him by the charity giving details of his donation together with his PPS No. The charity then uses the form to claim back the tax which Tom has already paid on this €250 directly from Revenue – €250×41%= €10,250 and the revenue divide this by 59 (100% minus 41%)= Amount charity earns from persons tax= €173.72 plus the €250 which is 69.4%
Example 2 Self-assessment Donor
Siobhan is self-employed and makes tax returns on a self-assessment basis. Her marginal rate of tax is also 41%. Siobhan makes a donation of €250 to her favourite charity over the course of the tax year by monthly standing order of €20.83. Siobhan receives a receipt from the charity and when she fills out her tax return she deducts the donation of €250 from her taxable income thus reducing her tax bill by €105. It is Siobhan who benefits directly from the tax relief in this case.
Example 3 Corporate Donor
XYZ Ltd makes a company donation of €250 to their favourite eligible charity and receives a receipt. The company can claim a deduction for the donation as if it were a trading expense. The company pays corporation tax at 20% so their corporation tax bill is reduced by €250×20%=€50. The company gets the benefit of the tax relief in this case.
What if the donor pays tax through both PAYE and self-assessment?
Where a person is within self-assessment (say self employed) and also has income that is within PAYE, that person is considered a “chargeable person” and therefore is entitled to relief for the donations at the marginal rate of tax. In other words they operate as self-assessed donors as in example two above. This applies even where donors only have a very small proportion of income that is self-assessed e.g. 96% of donor’s income is PAYE and only 4% entered on a self-assessment tax return – for the purposes of the scheme this donor is treated as self-assessed NOT PAYE and should reclaim the tax not the charity.
Amendments to the original Act
Under a condition included in the 2003 Finance Act – where a donor is a member of or closely associated with a particular charity (e.g. an employee, a Board member, etc.) the tax relief is only available on donations of a maximum of 10% of the donor’s taxable income for the year in which the donation is made. For example if the donor gave their total salary to the charity only 10% of it would qualify for tax relief.
In 2005 income tax relief was introduced to the donation of publicly-quoted shares to eligible charities. This means that gifts of shares of €250 or above in a tax year are now eligible for tax relief. Those giving gifts of publicly quoted shares have to choose between an income tax relief OR Capital Gains Tax relief. If you choose income tax relief, the Charity will give you a receipt for the market value of the shares on the day the donation was made. This can be used to reduce your taxable income (if you are self-assessed for tax). If you are ‘taxed at source’ (i.e. a PAYE worker), Charity can claim the tax back as per the procedures for cash donations.
If you do not wish to claim income tax relief, you can claim capital gains tax (CGT) relief instead. If you choose to claim CGT relief, the sale of your shares will be treated as a ‘no profit, no loss’ sale, i.e. it is treated as if you sold shares for exactly the same price as you paid for them. It is important to remember that there is no ‘double tax relief’ – you cannot claim both income tax and capital gains tax relief. The Charities section of the Revenue Commissioners has indicated that it will be up to the local tax offices to deal with CGT claims.
From the 1st January 2007 under the 2006 Finance Bill, individuals with income in excess of €250,000 who have specified tax reliefs available to them have been restricted in the amount of tax relief they can claim each year. The specified reliefs that a person will be able to apply against their taxable income will be restricted to 50% of their gross income in any one tax year. Any excess reliefs will however be available for “carry-forward” to the following and subsequent years, subject to the 50% income cap.
There is no specific relief for donations of property or land.
Other points to remember
A donation must satisfy the following conditions:
- It must be in the form of money or designated securities or a combination of money and designated securities,
- It must not be repayable,
- It must not confer any benefit on the donor or any person connected with the donor,
- It must not be conditional on, or associated with, any arrangement involving the acquisition of property by the eligible charity or the approved body.
Where do you get these forms?
You can download the CHY2 form by clicking here or from the
Office of the Revenue Commissioners,
Tel: 067-44310 Fax: 067-32916
Electronic filing of forms
It is the intention of the Revenue Commissioners to require submission of “appropriate certificates” for individual donations in an agreed electronic format where charities and approved bodies have the facilities for this. In cases where the necessary facilities are not available the forms may be given in writing in an approved format.