Changes to the Tax Relief on Donations to Charity the practical details. Sheila Nordon Executive Director

Transcription

1 Changes to the Tax Relief on Donations to Charity the practical details Sheila Nordon Executive Director

2 Today s Briefing Background to the changes announced in Budget 2013 Legislative changes introduced in Finance Act 2013 How the revised scheme will operate in practice Automating the reclaim/refund process work in progress Your questions answered by the panel

3 CONTEXT Why Simplification? Existing Tax Relief Scheme (S848A TCA) requirements: Donations of 250 or more Must be given at arms length with no strings attached PAYE donors benefit of refund to the charity Self-assessed donor tax relief goes to the donor Certain restrictions association with the charity (10% cap) and general higher earner restriction on cumulative use of tax relief Tax relief at the marginal rate where sufficient tax has been paid Worth an average 30/ 32million refunds on PAYE donations and est. 18m relief to Self-Assessed Administration Annual Appropriate Certificate completed by PAYE only donor to include Name, PPS number, amount of the cumulative donations paid to the charity, rate of tax and signature

4 In Practice.. Difficulty in getting correctly completed forms back from qualifying donors every year Discussing tax affairs of donors inappropriate! PPS Numbers and DATA PROTECTION created problems for both charities and Revenue PAYE only vs Self-Assessed inc. rejections Solution required! Minister Noonan agreed to setting up a Working Group led by Dept. Finance with ICTR and Revenue

5 Conditions attached.. Simplify operation of the scheme Reduce Admin burden on Charities and Revenue At no extra cost to the Exchequer i.e. had to be revenue neutral from an Exchequer perspective at current levels of donation Legislative Proposals developed and consulted on Feb to May 2012 Proposals for simplification of the administration of scheme developed based on submissions

6 Finance Act 2013 legislative changes Tax refund in all cases to the charity Blended tax rate of 31% to apply to all donations regardless of tax rate of donor - on a grossed up basis ( 250x100/69 = =refund of ) Removal of charitable donations scheme from scope of the high earner s restriction Annual limit of 1m per individual can be tax relieved under the scheme

7 Administration Simplification Option for a 5 year enduring declaration from donors (1 year option must also be available) PPSN still required for first signed declaration but can be renewed more easily using charity identifier (telephone, text, online, etc.) Refund claims to be submitted electronically idea is to automate the process (only rejection will be for insufficient tax or incorrect PPSN) Refunds for PAYE donors can be made after P35 info is received by Revenue (Feb. deadline) Self assessed claims can be submitted but refunds only after tax returns are made (Oct/Nov. deadline)

8 Revenue Donations Scheme.. Venue: Davenport Hotel Date: 27 th June 2013 Revenue Commissioners - Donations Scheme Liam Keogh A.P.

9 Scale and types of charitable bodies who hold exemption 8,311 Bodies listed on our Renenue website with the charitable tax exemption 450 approx new applications annually for the exemption Application form CHY 1 together with governing instruement etc see Revenue Website. 2,235 of these charities authorised for the donations scheme as listed on Revenue website Approved Bodies as defined in Schedule 26A TCA 1997 also qualify for the Donations Scheme Breakdown between categories with the exemption Charity Pemsel Breakdown community 46% Poverty 13% Religion 15% Educational 26% Poverty Educational Religion community

10 The Scheme of Tax Relief on Donations from PAYE only Year No of Donors Gross Contributions Donations + Tax Relief Donations Amount Tax Refunds , m 47.0m 25.3m , m 57.1m 29.5m , m 67.3m 31.6m , m 61.0m 30.2m , m 53.1m 26.3m , m 51.4m 25.1m The above chart shows the Tax refunds given on Paye only donations for the last 6 years

11 Year The Scheme of Tax Relief on Donations from Self Assessed Taxpayers No of Donors Donations Amount Tax Refunds , m 18.3m , m 21.0m , m 21.7m , m 21.4m , m 19.5m , m 19.8m The above chart shows the estimated cost to the exchequer on self assessed donations for the last 6 years where figures are available

12 The Scheme of Tax Relief on Donations Section 848A TCA 1997 Leaflet CHY 2 Must have CHY exemption for 2 years before applying to be authorised List of Authorised Charities on 2,235 Approved Bodies as listed/defined in Schedule 26A TCA Donation in excess of 250 annually in money or securities No benefit accruing to the donor Must be non-repayable A restriction (10% of Income) where the donor is connected to the charity In the past different provisions applied for Paye Only donors, self assessed or corporations. Charities/Approved bodies could claim relief in respect of Paye only donations on a grossed up basis. Self assessed and companies claimed the relief themselves in their returns or accounts respectively up to and including tax year The different treatment of donations from Paye Only donors V the Self Assessed has caused confusion and a compliance burden for both the charity sector and Revenue. The new scheme as announced by the Minister for Finance in the Finance Act 2013 is in response to these difficulties and the changes apply to all individual donations made from 1 st Jan 2013 onwards.

13 The following outlines the main changes to the scheme for donations made in 2013 Donations from all individual donors (both PAYE and Self Assessed) to be treated the same with the tax relief being repaid to the charity or approved body in all cases The refund will be given at a blended tax rate of 31%(this blended rate is to ensure the scheme remains cost neutral) and all individual donations will be regrossed at this rate. The charitable donation scheme will be removed from the scope of the high earners restriction An annual limit of 1 million per individual, which can be relieved under the scheme. A new enduring certificate which will be valid for 5 years has been introduced. CHY 3 Cert (available soon on our website). A new annual certificate. CHY 4 Cert(available soon on our website) The revised scheme will operate in respect of eligible donations made in 2013 and subsequent years. Claims for 2012 and earlier years will continue to be dealt with under the old regime. It should be noted that Section 865 Taxes Consolidation Act 1997 imposes a general 4-year time limit on claims for repayment of tax. Corporate Donations - There are no changes proposed to the scheme as it applies to corporate donations. Corporate donations will continue to be allowed as a deduction similar to a trading expense and there is no limit on the amount that a corporate body can donate to approved bodies for tax relief purposes.

14 Making a Claim in 2014 in respect of Donations made in Charity/Eligible body must have original CHY 3/CHY4 Certs from donors The Claimant must be registered for a new Taxhead called Charitable Donations Scheme - CDS. Where possible Revenue will register all current claimants in the Scheme for this Taxhead automatically. All current Claimants should receive a letter to confirm their details within next few months- The correct PPSN of the claimant body is crucial for this process to register the claimant for this new Taxhead In Nov/Dec 2013 all claimants will receive a communication that they must be registered for ROS to make a claim and the first step of registering for ROS will be completed for them the applicants then must proceed with the remaining steps to register. The claim is then submitted through ROS in 2014 Submit a claim listing the donors name, ppsn, amount of donation, indicate if donor is connected etc, through a ROS based application. We have informed our IT development team that a facility to allow claimants update details from compatible software to ROS is required. Submit completed 848A claim form and declaration through ROS The declaration 848A form will encompass all the conditions of the scheme as outlined in the CHY 3 and CHY 4 forms completed by the donor.

15 Making a Claim in 2014 in respect of Donations made in 2013(Contd). Donor s must have paid tax on the grossed up amount of the donation otherwise restriction to tax paid applies All donations as listed will be linked with the individual s Tax records to check that the refund as claimed is due to the claimant. P35 returns for 2013 from employers are due on 15 th Feb 2014 while self assessed forms 11 returns are due in Oct/Nov 2014 No refunds can be made until that donors tax return is submitted and settled with Revenue. From April 2014 we will begin to make refunds in respect of claims made where that donors tax position is settled i.e.- where P35 submitted and where Form 11 submitted subject to the proviso that sufficient tax has been paid to cover the refund and that the other conditions are also met. We will have a system in place where periodic intervention will take place on the balance of claims that have failed to refund because the returns for the donors are outstanding thereby refunding the claims piecemeal as the validation rules apply to that donor. The periodic intervention will cease when it becomes clear that that donor will not satisfy the conditions of the scheme

16 Other Issues Data Protection - As has been the case in recent years it will not be possible to advise where a certain donor does not yield a refund to the claimant However the new scheme as designed to treat all individual donations in the same way will not have the same problems as the old scheme. Firstly there will be no differentiation between PAYE Only and the Self assessed donors thereby no confusion on which donors to claim for and secondly the blended rate of 31% removes the restriction as to the rate of tax paid by the donor. These two changes will remove the main difficulties that arose in the old system claims can be made at any time after the end of the Tax year 2013 subject to the 4 year time limit. As previously stated 2012 claims and prior will be dealt with as normal under the present scheme through the use of secure claims will continue to be dealt with until the 4 year time limit runs out in Dec An Enduring Certificate is valid for 5 years unless the charity is notified of its amendment or cancellation before the end of that period by the donor An Enduring Certificate can be renewed at the end of the valid period.

17 ROS Registration 3 Steps to Becoming a ROS Customer Step 1: Apply for your ROS Access Number (RAN) (It is proposed that this step will be done automatically for all current claimants under the Donations Scheme) Step 2: Apply for your Digital Certificate Step 3: Retrieve your Digital Certificate

18 Your Questions Answered