Ireland To Improve Tax Relief For Approved Donations

by Jason Gorringe, Tax-News.com, London

14 February 2012

The Irish government is to make changes to the tax relief available for donations to approved bodies, which will have effect from 2013.

Minister for Finance, Michael Noonan, has announced his intention to bring forward amendments to the charitable donations scheme. He wants to see the changes take effect from January 1, 2013.

Under Section 848A of the Taxes Consolidation Act 1997, the government provides tax relief at the donor's marginal rate of tax (20% or 41%) for donations above EUR250 (USD330) to approved bodies.

Under the proposed changes, donations from all individual donors under the scheme will be treated in the same manner, with the tax relief in all cases being repaid to the charity. As a result, self-assessed taxpayers would no longer be able to claim a deduction on their tax returns for donations made under the scheme.

Noonan will also introduce a blended rate of relief that would apply to all taxpayers, regardless of their marginal tax rate. This would involve a rate of refund of around 30%. In addition, all donations would be 'grossed up' as is currently done for donations from individuals within the pay-as-you-earn (PAYE) collection system.

The charitable donations scheme will be removed from the scope of the high earners’ restriction, and an annual limit of EUR1m per individual for tax relief under the scheme will be introduced.

Noonan said: “Officials from my Department, the Revenue Commissioners and the Irish Charities Tax Reform Group have been working together on possible options to simplify the relief scheme and thus reduce the administrative burden on charities and the Revenue Commissioners of operating the scheme. Simplification of the scheme is also one of the recommendations of the Forum on Philanthropy and Fundraising. Having considered the proposals made to me by the working group and the Forum I have decided to signal my intention to introduce changes to the tax relief scheme from next year.”

“Even though the simplification proposals are designed to be revenue neutral, I am cognizant that the changes proposed might not be beneficial for all of those bodies that currently receive charitable donations. In order to ensure that all of those affected might have an input into the eventual policy decision in this matter, I have decided to engage in a public consultation process,” Noonan added.

Noonan has opened a public consultation on the plans, which will close on the May 11, 2012.

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