Tax relief on Charitable donations with PAYE and self-employed income

[Usjes]

Hi

I am a PAYE worker but as I get some share options I am considered 'self-assessed' and am required to fill out a Form 11 Tax return. When I donate more than €250 a year to any charity they send me a form at some stage to claim back the tax but the form always says that it should ONLY be filled out if you are a PAYE customer. So I have been assuming that I can't use this form and ignore them. I find it a bit annoying though that they never outline the correct procedure for those who, like me, are self-assessed. Am I correct ? Or can I use the PAYE-only form as long as some of my income is PAYE ? (as opposed to a self-employed person)

Thanks

 

[Brendan Burgess]

I did a Key Post on the topic

http://www.askaboutmoney.com/showthread.php?t=137938

It seems that you can claim it directly.



Brendan.

 

[Usjes]

I did a Key Post on the topic

http://www.askaboutmoney.com/showthread.php?t=137938

It seems that you can claim it directly.



Brendan.

So you're saying that I claim it and then I am supposed to forward it to the charity ? This seems a very odd arrangement. Its very odd that revenue would trust me to forward it on to the charity rather than just pocket it myself. Also what exactly is a "chargeable person" in this context? Your post states that someone who is not "chargeable" could just go the PAYE route

Similarly, in the case of a donation made by an individual who pays portion of his/her tax under the Self-assessment system
but who also pays tax under the PAYE tax system, the individual will claim the relief and there is no grossing up arrangement unless he is not deemed a "chargeable person" for self-assessment purposes.

 

[T McGibney]

So you're saying that I claim it and then I am supposed to forward it to the charity ? This seems a very odd arrangement. Its very odd that revenue would trust me to forward it on to the charity rather than just pocket it myself.

Its up to the taxpayer to do as they see fit with their tax rebate. Revenue dont require the rebate to be paid to charity.

 

[Usjes]

Its up to the taxpayer to do as they see fit with their tax rebate. Revenue dont require the rebate to be paid to charity.

Okay I hadn't realized that. I do want to donate the rebate to the charity but I am just trying to figure out what the correct way to do this is. From the above comments it seems I can do it by claiming it back and then forwarding it to the charity but this is obviously more hassle for me so I would like to be able to just fill out the form the charity sends me. So this is what my question boils down to:
Am I, as a self-assessed person, entitled to use this 'PAYE-only' form?
Brendan's post suggests that I am provided I am not deemed a "chargeable person" for self-assessment purposes. But I have no idea what this means. Can anyone clarify?

 

[T McGibney]

Brendan's post suggests that I am provided I am not deemed a "chargeable person" for self-assessment purposes. But I have no idea what this means. Can anyone clarify?

Its technical jargon for 'self assessed'. If you're self-assessed, you dont use the PAYE form

 

[mandelbrot]

So you're saying that I claim it and then I am supposed to forward it to the charity ? This seems a very odd arrangement. Its very odd that revenue would trust me to forward it on to the charity rather than just pocket it myself. Also what exactly is a "chargeable person" in this context? Your post states that someone who is not "chargeable" could just go the PAYE route

Similarly, in the case of a donation made by an individual who pays portion of his/her tax under the Self-assessment system
but who also pays tax under the PAYE tax system, the individual will claim the relief and there is no grossing up arrangement unless he is not deemed a "chargeable person" for self-assessment purposes.

If you want to give a charity €250, you give them €250.

Afterwards, if you're a PAYE-only taxpayer, they can claim a rebate based on your donation, if you fill in the form. If you are a high rate taxpayer, this means you have effectively given the charity €423, €250 net and €173 tax.

This is the case unless you are a chargeable person, i.e. someone who is required to complete a form 11, in which case you are entitled to claim the deduction yourself.

So, if you are a high rate self-assessed taxpayer, when you give the charity €250, you are entitled to tax relief on it against your own liability (€250 @ 41% is 102.50) so you've given them 250 but its cost you 147.50.

In order to give them the same donation as a self assessed person you would therefore have to give them the €423 directly and then get 41% of it back on your tax return, costing you €250.

 

[Usjes]

Its technical jargon for 'self assessed'. If you're self-assessed, you dont use the PAYE form

I'm afraid this is not consistent with Brendan's post which states:

Similarly, in the case of a donation made by an individual who pays portion of his/her tax under the Self-assessment system
but who also pays tax under the PAYE tax system, the individual will claim the relief and there is no grossing up arrangement unless he is not deemed a "chargeable person" for self-assessment purposes.

This clearly implies that a Self-assessed person may be either chargeable or non-chargeable with the latter being entitled to use the PAYE-only form.

So either yourself of Brendan must be in error.

 

[Usjes]

If you want to give a charity €250, you give them €250.

Afterwards, if you're a PAYE-only taxpayer, they can claim a rebate based on your donation, if you fill in the form. If you are a high rate taxpayer, this means you have effectively given the charity €423, €250 net and €173 tax.

This is the case unless you are a chargeable person, i.e. someone who is required to complete a form 11, in which case you are entitled to claim the deduction yourself.

So, if you are a high rate self-assessed taxpayer, when you give the charity €250, you are entitled to tax relief on it against your own liability (€250 @ 41% is 102.50) so you've given them 250 but its cost you 147.50.

In order to give them the same donation as a self assessed person you would therefore have to give them the €423 directly and then get 41% of it back on your tax return, costing you €250.

Hi Mandlebrot,

I understand now that I can do the way you suggest but, as stated above, I am looking for the simplest way of giving the charity the benefit of the relief and I define simplest to mean just filling out the PAYE-only form. My only question being am I entitled to do it this way ?

 

[mandelbrot]

Hi Mandlebrot,

I understand now that I can do the way you suggest but, as stated above, I am looking for the simplest way of giving the charity the benefit of the relief and I define simplest to mean just filling out the PAYE-only form. My only question being am I entitled to do it this way ?

You don't have a choice, this is what I'm telling you, it's an either/or situation.

If you are a "chargeable person", i.e. a person who is required to file a Form 11 tax return, you cannot use the PAYE-only form for the grossing up.

In any year that you are not required to file a Form 11, you can use the PAYE-only form.

 

[Brendan Burgess]

I'm afraid this is not consistent with Brendan's post which states:

Similarly, in the case of a donation made by an individual who pays portion of his/her tax under the Self-assessment system
but who also pays tax under the PAYE tax system, the individual will claim the relief and there is no grossing up arrangement unless he is not deemed a "chargeable person" for self-assessment purposes.

This clearly implies that a Self-assessed person may be either chargeable or non-chargeable with the latter being entitled to use the PAYE-only form.

So either yourself of Brendan must be in error.

I was quoting directly from the Revenue's website. I don't think that Tommy is inconsistent with it.

There are obviously cases where "an individual who pays portion of his/her tax under the Self-assessment system
...[who] is not deemed a "chargeable person" for self-assessment purposes."

Not sure what sort of a person that is.

I am not sure if this helps. I don't fully understand it.

Tax Return for 2010 for Employees, Pensioners & Non–Proprietary Directors
NOTE: Section 14 Finance Act 2005 amends the defnition of a “chargeable person” for Self-Assessment purposes. An individual who is in receipt of income chargeable to tax under the PAYE system but who is also in receipt of gross non-PAYE income of €50,000 or more from other sources, such as trading, professional or rental income etc but where this income has been reduced to nil or to a negligible amount because of deductions, losses, allowances and other reliefs, is regarded as a ‘chargeable person’. An individual who is a ‘chargeable person’ for the purposes of Self Assessment Income Tax should complete a Pay and File Income Tax Return Form 11E or Form 11

 

[Usjes]

You don't have a choice, this is what I'm telling you, it's an either/or situation.

If you are a "chargeable person", i.e. a person who is required to file a Form 11 tax return, you cannot use the PAYE-only form for the grossing up.

In any year that you are not required to file a Form 11, you can use the PAYE-only form.

You seem to be saying the same thing as T McGibney , and you may both be correct, however what you say is not consistent with Brendans original post which he says is derived from the revenue guide. In that post (http://www.askaboutmoney.com/showthread.php?t=137938) he says


Similarly, in the case of a donation made by an individual who pays portion of his/her tax under the Self-assessment system
but who also pays tax under the PAYE tax system, the individual will claim the relief and there is no grossing up arrangement unless he is not deemed a "chargeable person" for self-assessment purposes.

The highlighted parts above clearly imply that a self-assessed person may be either 'chargeable' or 'non-chargeable' and that 'chargeable' is not simply a synonym for 'self-assessed'.

As I say, you may be correct but it isn't consistent with the above. Moreover a colleague in the same situation as me says he always just uses the PAYE form and is adamant that the charity does get the benefit which would imply that it CAN be done this way, however what concerns me is whether or not it is correct/acceptable to do it this way or could it cause problems for me in the future should I be audited.

 

[WindUp]

use the PAYE-only form --- you only filled out the Form 11 due to the options

 

[mandelbrot]

You seem to be saying the same thing as T McGibney , and you may both be correct, however what you say is not consistent with Brendans original post which he says is derived from the revenue guide. In that post (http://www.askaboutmoney.com/showthread.php?t=137938) he says


Similarly, in the case of a donation made by an individual who pays portion of his/her tax under the Self-assessment system
but who also pays tax under the PAYE tax system, the individual will claim the relief and there is no grossing up arrangement unless he is not deemed a "chargeable person" for self-assessment purposes.

The highlighted parts above clearly imply that a self-assessed person may be either 'chargeable' or 'non-chargeable' and that 'chargeable' is not simply a synonym for 'self-assessed'.

As I say, you may be correct but it isn't consistent with the above. Moreover a colleague in the same situation as me says he always just uses the PAYE form and is adamant that the charity does get the benefit which would imply that it CAN be done this way, however what concerns me is whether or not it is correct/acceptable to do it this way or could it cause problems for me in the future should I be audited.

Sigh... I'm sorry, I don't seem to be able to adequately explain it, so I'll try again:

All of the things you are quoting are in fact consistent, if a little confusing to the layperson!

"an individual who pays portion of his/her tax under the Self-assessment system but who also pays tax under the PAYE tax system" could be a PAYE worker who has other income less than €50,000 a year, such as a rental property for example.

Such a person would pay any tax due on their rental income via a Form 12 - so they would NOT be deemed a chargeable person (i.e. not be required to file Form 11). Therefore such a person could avail of the PAYE taxpayer form for charitable donation relief.

If you are deemed a chargeable person, i.e. a person who must file a Form 11, by virtue of your share options, then you should not use the PAYE form, but claim the relief on the Form 11.

So the paragraph you quoted, and everything Brendan, Tommy and I have told you, are fully consistent. The term "self assessed" simply means that the taxpayer themself informs Revenue of some / all of their income, rather than a purely PAYE taxpayer whose employer provides all relevant information, including payment of tax due.

If this doesn't make sense to you I apologise, but I can't think of any easier way to clarify it. As for what your friend is doing, it may well be accepted and processed, as might your form, but it wouldn't strictly speaking be correct. Having said that though, a Revenue official isn't going to get bent out of shape over it, since it's not you who would be benefitting from the error (unless you also claimed the relief on your Form 11).

 

[Usjes]

Sigh... I'm sorry, I don't seem to be able to adequately explain it, so I'll try again:

All of the things you are quoting are in fact consistent, if a little confusing to the layperson!

"an individual who pays portion of his/her tax under the Self-assessment system but who also pays tax under the PAYE tax system" could be a PAYE worker who has other income less than €50,000 a year, such as a rental property for example.

Such a person would pay any tax due on their rental income via a Form 12 - so they would NOT be deemed a chargeable person (i.e. not be required to file Form 11). Therefore such a person could avail of the PAYE taxpayer form for charitable donation relief.

If you are deemed a chargeable person, i.e. a person who must file a Form 11, by virtue of your share options, then you should not use the PAYE form, but claim the relief on the Form 11.

So the paragraph you quoted, and everything Brendan, Tommy and I have told you, are fully consistent. The term "self assessed" simply means that the taxpayer themself informs Revenue of some / all of their income, rather than a purely PAYE taxpayer whose employer provides all relevant information, including payment of tax due.

If this doesn't make sense to you I apologise, but I can't think of any easier way to clarify it. As for what your friend is doing, it may well be accepted and processed, as might your form, but it wouldn't strictly speaking be correct. Having said that though, a Revenue official isn't going to get bent out of shape over it, since it's not you who would be benefitting from the error (unless you also claimed the relief on your Form 11).

Okay, finally I understand, thanks for the explanation. The mistake I was making was that I thought 'Self-assessed' meant someone who filled out a Form 11, but from the above it is clear that a self-assessed person may or may not be required to fill out a Form 11, and if they are they should not use the PAYE-only form.