Budget 2013 – Section 848(A) changes announced
By Andrew Hetherington.
Business to Arts members PwC and Mason Hayes & Curran hosted a breakfast briefing with ICTR in December 2012 to explain how recent changes to the S848A Tax relief scheme on charitable donations announced in Budget 2013 would affect registered charities.
During Budget 2013, the Minister for Finance announced he accepted the proposals of the Working Group for simplifying the Tax Relief Scheme on Charitable Donations which recommended:
- From 01/01/2013 all donations from individuals (PAYE and Self-Assessed) will be treated the same, with the tax relief in all cases being repaid to the charity.
- Tax relief on donations from taxpayers is to be applied at a blended rate of 31%, regardless of the individual’s marginal rate. All donations will be grossed up as is currently the case with PAYE donations. For example, this means that the CHY will be eligible to a refund (in effect, a top-up) of €112.32 for every €250 donation – making a grossed up total of €362.32.
- The charitable donations scheme has been removed from the scope of the higher earners’ restriction of Section 485 (C). This ‘decoupling’ recognises the key difference between tax relief to private philanthropy to promote the public good and private investment to promote private gain.
- An annual limit of €1m has been introduced per individual, for which tax relief can be claimed under the scheme.
It is worth noting, that the distinct aims of the changes to Section 848(A) were to simplify the process, reduce administration involved for all parties and increase the uptake of the scheme across the charitable sector.
To make tax-efficient donating easier, donors can now opt to make an ‘enduring declaration’ to charities for up to five years. This removes the need for annual form filling by donors and eases the administrative burden on charities and Revenue. In addition, all claims made under Section 848a will be submitted and paid online, to reduce paperwork from 01/01/2014.
The processes of implementing the changes to Section 848(A) are currently being worked on and new declaration forms are expected in early 2013.
At the briefing clarifications that were sought from the audience (which were confirmed) included:
- The minimum eligible donation under Section 848(A) remains at €250 in any one financial year
- The changes are only applicable to donations made by individuals. There is no change to the treatment of corporate donations.
- The restriction remains where an individual donor is associated with the charity (e.g. an employee).
- A period of transition will exist (ie. dual processes) as the tax affairs of individuals can take up to four years to be finalised .
- There is a commitment from the Revenue Commissioners to monitor the uptake of changes and assess the appropriateness of the blended 31% rate, which may need to be changed in the future.
- Benefit is only relevant for the year in which a donation is made – ie no carry forward of the benefit is possible for charities.
- The Minister for Finance asked for further recommendations from the Working Group on the treatment of large-scale donations to existing foundations or for the establishment of new foundations.
At the end of the briefing there was widespread acknowledgement of the progressive nature of these changes and the work of ICTR and the Working Group for simplifying the Tax Relief Scheme on Charitable Donations.