For the uninitiated (me I think) one is asked to ensure that a donor pays enough tax in the year so that the charity can then claim tax further tax back (eg on a £1 gift they can claim 25%. making £1.25) This is clear enough on tax deducted on bank interest received at source, and PAYE tax deducted (Even though the client might get a tax refund for other reasons on these 2 types of tax deductions)
As is usual am trying to understand what HMRC defines as the tax paid. BUT for the self employed is this the tax after the personal allowance is deducted from the profit, and for dividends is it the tax credit or is this not deemed as tax paid.
Not sure what you are asking but I think it's perhaps when signing a gift aid donation you have to declare that you pay at least the amount of tax the gift aided charity will be able to reclaim. If this is the case it means that the 25% of the donation must be at least as much as you have physically paid in tax ie after personal allowance as all income before personal allowance is tax free.
Dear Semsley, Thank you very kindly for your quick helpful response and I apologise to you and fellow members for not expressing myself clearer. I'm thinking along the lines of people say in 10/11 who may have earned various types of incomes e.g. such as employment, self employment, dividends and taxed interest. Some of these as you say may or can be "physically taxed" (to me anyway) at source eg employment, and interest. Dividends have a notional tax credit so not sure if this is "physical". The tax on self employment is sorted out at the year end. One therefore needs to know out of their income what would be the physical tax to judge the gift aid claim.
Therefore what do you define out of these incomes as being "physically taxed". The employment and interest may have been physically taxed to me at source, possibly the dividends, and in your terminology meet the gift aid criteria, but if all or some of the tax is refunded at the year end on these if say there was a coding error or there was income below the £6475 threshold, then have they paid tax?. If someone has paid tax and it is then wholly refunded after the personal allowance then are you saying that they cannot meet the "physically paid" gift aid criteria.
I appreciate I'm getting overly complicated, so apologies, and am not seeing the wood for the trees but I fear putting down some gift aid on a return when the client doesn't meet the necessary criteria. Wouldn't it be lovely if one could see a worked example somewhere for people to view.
This link will take you to the HMRC page about gift aid.
It is the donors responsibility when they sign the gift aid declaration to ensure they pay the amount of tax to cover the amount of tax claimed back by the charity in each tax year. This means the final amount of tax received by HMRC after all adjustments etc have been made. If they haven't paid enough tax, HMRC can ask them to pay the difference.
On the SATR you only really need to put on any gift aid for a high rate tax payer, if your client claims age-related Personal Allowance, Married Couples Allowance or tax credits or if they want to carry back a Gift Aid donation.
HTH
-- Edited by Helz on Wednesday 18th of January 2012 07:01:13 PM
Dear Helz, Many many thanks. I believe my confusion relates to a client receiving an overall tax refund for overpaid tax for the year in question of some £300 (for bank interest deducted at source), yet paying gift aid of some £800 (gross £1000) . The tax gift aid is balanced by the client's 10% dividend tax credits of £200 on the online tax calculation covering and balancing out the tax on gift aid payments charge of £1000 @20% = £200 giving Income Tax due after dividend tax credits as £0, before refunding the bank interest tax of £300.
Therefore one can have a situation of meeting the gift aid criteria of paying enough tax, yet still getting an overall tax rebate. Anyway that's my reading of it!!!
