Income Tax Act 2007 section 520

Gifts entitling donor to gift aid relief: income tax treated as paid

Section 520 explains how charitable trusts are treated for income tax purposes when they receive gift aid donations from individuals, and how the gross amount of the gift and the associated tax credit are determined.

• When an individual makes a qualifying gift aid donation to a charitable trust, the trust is treated as receiving a grossed-up amount, not just the cash actually handed over
• The grossing-up is calculated by reference to the basic rate of income tax for the tax year in which the gift is made (e.g. at 20%, a £80 gift is grossed up to £100)
• The difference between the grossed-up amount and the actual donation is treated as income tax deducted at source from the gift
• That notional income tax is treated as having been paid by the trustees of the charitable trust, enabling them to reclaim it from HMRC