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Gift Aid > Other Tax-Efficient Giving > Payroll Giving
Payroll Giving
A number of employers make it possible
for employees to give to charity (including the church) via a payroll
giving scheme (known as Give As You Earn to those who, for example, use
the Charities Aid Foundation to process their donations). Employees give
from their pay before tax is deducted. From April 2000, this scheme was
enhanced as follows:
- The Government planned to advertise
the scheme to make it more widely known.
- The maximum limit of £1,200 a year
for donations through Payroll Giving was removed. People can now
give as much as they like under the scheme.
- To encourage this method of giving the
Government increased the gross value of the gift under Payroll
Giving by 10% for three years from April 2000 to April 2003
- Regulations require the agency to pay
the money to the charity within 60 days.
For example:
- If a donor gives £100 to a church
through Gift Aid the church can recover the tax paid which, at the
basic rate of 22% from April 2000, increases the value of the gift
to £128.21.
- If a donor gives by Payroll Giving,
the gift is made gross and the donor’s tax bill is reduced by tax
at their highest rate. If the donor gives £128.21, the cost will be
£100 to them at the basic rate and only £76.93 if they are a
higher rate taxpayer. The church will receive only £121.80 because
£6.41 (eg 5%) is retained by the agency as a levy for operating the
scheme.
- Between 06/04/2000 and 05/04/2003, the
Government increased the gross value of the donation by 10% – i.e.
a further £12.82.
- So a higher rate taxpayer will have
given £76.93 after tax and the church received £134.62!
The problems with encouraging use of the
scheme do not alter, however:
- The donor needs to ensure the amount
they choose to give includes the tax which would be ordinarily be
claimed back by the church under Gift Aid. Not every donor will
understand this.
- The forms have to be completed at the
workplace and not in the presence of the charity – so some are
never completed.
- The charity has no proof that the
forms have been completed until notified by the agency (with a
Declaration the church sees the completed form).
- The full value of the gift does not
reach the charity as the agency takes a levy – usually 5%.
Until April 2003, the church benefited
from donors who use the scheme correctly, while the government added its
10%. After that however, the church benefits more from Gift Aid, as the
payroll giving agency charge will not apply.
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