Blair’s Donation Highlights Gift Aid Benefits

by Amanda Banks, Tax-News.com, London

19 August 2010

Tony Blair’s announcement to donate the GBP4.6m (USD7.2m) advance from his autobiography, A Journey, to the Royal British Legion has been met with mixed opinions.

Blair has the potential to reduce his liability to tax by utilizing the Gift Aid scheme, introduced while he was Prime Minister 10 years ago. Under this scheme, charities can reclaim basic rate tax (20%) from HM Revenue and Customs on the donation’s "gross" equivalent – the amount before basic rate tax was deducted. This means that GBP10 donated using Gift Aid is worth GBP12.50 to the charity. Higher rate taxpayers can claim the difference between the higher rate of tax (40%) and the basic rate of tax on the gross value of the charitable donation. Therefore a donation of GBP100 would result in the charity receiving GBP125, allowing the taxpayer to claim back 20% of GBP25 on their self-assessment return.

With the former Prime Minister falling into this latter category, the tax implications of his donation have provoked questions over the personal benefits Blair is set to receive, including a much reduced personal tax bill.

The advance and subsequent royalties from sales of the book will be channeled into the Legion’s Battle Back Challenge Centre, a project that will provide high-tech rehabilitation services for injured British servicemen, due to open in summer 2012.

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