Corporation Tax Act 2010 section 471

Gifts qualifying for gift aid relief: income tax treated as paid

Section 471 explains how a charitable company is treated for tax purposes when it receives a gift aid donation from an individual, and how the associated income tax is regarded as having been paid.

• When an individual makes a qualifying gift aid donation to a charitable company, the charity is treated as receiving a grossed-up amount rather than just the cash donated.
• The grossed-up amount is calculated by reference to the basic rate of income tax for the tax year in which the gift is made.
• The charity is treated as having received the gift under deduction of income tax at the basic rate, meaning the gross gift equals the donation plus the tax element.
• The income tax treated as deducted from the grossed-up gift is regarded as income tax paid by the charitable company, which it can then reclaim from HMRC.