Income Tax Act 2007 section 424

Charge to tax

Section 424 imposes an income tax charge on individuals who make Gift Aid donations to charity where the tax treated as deducted from those donations exceeds the individual's combined income tax and capital gains tax liability for the year.

• When Gift Aid donations are made, HMRC treats basic rate tax as having been deducted — the charity reclaims this from HMRC, but the donor must have sufficient tax liability to cover it
• If the total tax treated as deducted from the donations ("amount A") exceeds the donor's combined income tax and capital gains tax liability for the year ("amount C"), a tax charge arises on the donor equal to the shortfall
• The capital gains tax element of "amount C" is calculated without the benefit of double taxation relief under international arrangements, ensuring those reliefs cannot be used to reduce the threshold
• The tax charge falls on the individual donor personally and is charged for the tax year in which the donations were made