Article by Liz Lathwood, Technical Officer, November 2001. Following the FA 2000 revisions to the rules for charitable giving members may be considering the best way for partnerships to give money to charities.
Previously the provisions of section 74 and 577 of ICTA 1988 combined with extra-statutory concession B7 have meant that tax relief was only available for donations to local charities, with the tax relief being given by deduction in the Schedule D Case I/II computation.
With the introduction of Gift Aid and the abolition of any limit for the gift, partnerships can now give any amounts to any charities and claim the relief through the partners’ own Self-Assessments. The Revenue’s guidance notes for charities (which can be viewed on their website at www.hmrc.gov.uk/charities) explain that in England, Wales and Northern Ireland one partner can make a Gift Aid declaration on behalf of all the partners provided he or she has the power to do so under the terms of the partnership agreement or some other instrument given under seal. Otherwise it will be necessary for each partner to make their own Gift Aid declaration. In Scotland, as the partnership has legal personality, a Gift Aid declaration by one of the partners on behalf of the partnership will always be sufficient. The information to be provided on declarations is given in the Revenue guide at paragraphs 3.15.2 and 3.15.3.
With Gift Aid the donation by the partnership is paid net of basic rate tax. The amount must be added back in the partnership Case I/II computation and the partners should enter their share on their own Self-Assessment returns. Paragraph 3.15.4 of the Revenue guide explains that:
“how the donation is apportioned between the partners is a matter for them to decide, but, unless there is evidence to the contrary, it will be assumed to be in accordance with their share of the partnership profits”.
Partners paying higher rate tax will get their extra relief (which could be 18%, 20% or 22.5% depending on the make-up of their income) through their self-assessment.
Although the Institute has not yet had the opportunity to discuss the position for limited liability partnerships (LLP) with the Revenue, it appears that section 118ZA(1)(b) of ICTA 1988 achieves the effect that donations are treated as made by the members individually ie an LLP Gift Aid payment would be treated in the same way as a payment by an ordinary partnership, with partners making individual claims on their tax returns. This would be the case as long as the LLP was “carrying on a trade, profession or other business with a view to profit”.
Liz Lathwood (Technical Officer, Personal and Capital Taxes)
14 November 2001
This article will also appear in Tax Adviser magazine.
Technical Department
020 7235 9381
