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Springfords LLP blog

Some news, views and comments about everything and anything, relevant and irreverent.

Charitable Giving and Tax

25 November 2014

With the VAT exemption on the recent Band Aid single, the charity will earn more from sales of the single. You don’t need to be tax experts like Springfords to work out the potential benefits of waiving taxation to encourage civic philanthropy on a nationwide scale.

Long before Michael Burke went into the jungle - he wasn’t even a celebrity back then in 1984 when Band Aid evolved - we’ve been responding to the desperate needs of our fellow man. When it comes to alleviating the plight of those not blessed with our good fortune, the British are particularly generous.

That goes for our revenue services as well. Not normally mentioned in the same sentence as generosity, the Chancellor has frequently instructed Her (and His) Majesty’s tax collectors to waive their obligations upon us, in the case of charitable donations.

Most common of these is the formalised Gift Aid system, which has been made so simple now, it’s more complicated not to invite HMRC to add to your generosity.

It is of course relatively easy to waive a taxable charge, when that charge has been normalised in the first place. Twenty years before Midge Ure and Bob Geldof first entreated us to ‘give us your money’, we wouldn’t have had to worry about whether a percentage of retail merchandise sales went to the treasury, rather than to people and territories in straitened circumstances. The tax in question, VAT, is a relatively modern construct - it’s predecessors were not applied at the point of sale, so were invisible to consumers, no matter how good the cause.

Go back even further in time and the Income Tax, which charities can now recover from your donation through Gift Aid, was famously introduced as a temporary measure to pay for the Napoleonic Wars. As all upstanding citizens are still paying the tax, we can only assume going to war with France is an expensive business!

However, there’s a counter argument that says if normalised taxation was levied regardless, it would have no noticeable effect on charitable giving, and the revenue raised could be put to work on the bigger humanitarian aid programmes that individual charitable causes cannot effectively tackle. It could also be argued that revenue raised this way could benefit a wide range of causes, allowing the public to feel rightly generous towards many relief efforts, both abroad and at home.

The likelihood is that the balance of publicity and feel good factor accrued by waiving taxation encourages a greater overall charitable donation. The economics of aid is less clear than a Geldof lyric, when the factor of human nature is added, but there’s no denying that a good cause supported does good for the needy and the giver alike. That’s an argument that not even the Revenue would find taxing to concede.

If you want to give to the current appeal to help stop the Ebola virus outbreak, visit www.bandaid30.com. If you have any good cause that’s close to your heart, you can find most charitable organisations registered with the Office of the Scottish Charity Regulator - “Oscar” at www.oscr.org.uk, or in England and Wales, at the Charities Commission (www.gov.uk/government/organisations/charity-commission). Both organisations hold listings online.

If you’d like any help with making donations and making sure the right tax exemptions are applied, at Springfords we’d be glad to help.


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