Tax Relief for Charitable Donations by Individuals – PAYE/Self Employed Persons

The Finance Act 2013 simplified the tax system for charitable donations and has a ‘blended’ tax relief system in relation to donations. All treated at 31% blended arrangement and tax relief will be given on a ‘grossed up’ arrangement.

E.g. Individual/Self Employed person makes donation of  €500 – this is deemed to be a ‘net’ of tax so charity actually gets grossed up benefit of €655 (100% plus 31%)  – hence an extra €155 for the charity payable by Revenue. A form must be completed to gain this benefit and is paid once donor files his tax returns.

Tax Relief for Corporate Donations

They are treated differently and companies can ‘write off’ the tax as a trading expense – hence the company rather than the charity gets the benefit. This is very attractive to companies.

E.g. Company X donates €250 receiving a receipt from the charity. Company can claim a deduction for the donation as if it were a trading expense. Company pays corporation tax at 20%. Corporation tax bill is reduced by €50 getting direct tax benefit.