Breakthrough on Donations Tax Relief
Minister for Finance, Michael Noonan, has announced that he intends to amend the existing tax relief for charitable donations in Budget 2013.
The government proposal involves:
- a new composite rate of tax relief on charitable donations of ‘around 30%' * to replace existing higher and standard rates
- a tax relief scheme on donations that will no longer be subject to the “higher earner” limitation on the amount of cumulative tax relief that can be claimed by individual taxpayers in any tax year. Instead the donations scheme will be capped at €1m
- the benefit of the tax relief in all cases now going to the charity (i.e. from now on PAYE and self-assessed taxpayers will be treated the same with charities benefitting from the tax refund in all cases)
Given that the benefit of the relief will in future go to the charity in all cases, the sector will receive an opportunity to boost donations and income from this source...
The proposals are subject to a three-month consultation period, beginning immediately, during which charities and others may make comments and suggestions to fine-tune or improve the proposals. It is intended that the specific terms will be formally announced in next December’s Budget and become operative from January 2013.
The proposals have emerged from detailed discussions between ICTR, the Revenue Commissioners and the Department of Finance following the election of the new government last year. Details were announced by the Minister for Finance yesterday, in conjunction with publication of the 2012 Finance Bill.
The Report of the Commission on Taxation supported treating all donors the same but had proposed to standardise relief on charitable donations (i.e. 20%). The Commission, however also stated that “there is a general benefit to society from donations to charities …the state should continue to support this activity.” ICTR argued that such a rate would disincentivise giving by the public and seriously undermine the financial ability of charities to respond to the needs of the most vulnerable in society. Well done to ICTR for their excellent work in this area!
A number of issues remain to be clarified related to removing the current requirement for the collection and retention of personal data on donors on an annual basis, with the aim of reducing as much as possible the administrative burden on charities. The Revenue Commissioners are also anxious that this administrative burden be reduced for their own staff.
Charities are invited to make submissions. Details on the proposals and submission process can be downloaded here.
Submissions may be emailed to firstname.lastname@example.org or sent by post to ‘Donations Scheme Consultation’, Income Tax Incentives, Financial Services and Taxation Division, Department of Finance, Government Buildings, Upper Merrion Street, Dublin 2.
* The specific level of the new composite rate affecting charitable donations (‘around 30’%) will also need to be agreed.
(Sources: ICTR, www.businessandleadership.com, Department of Finance)