Where the value of quoted shares is to be used to benefit a charity there are two routes for the individual donor to attract tax relief. The donor may sell the shares and donate the cash, receiving an extension to their basic income tax rate band of the grossed up amount. Alternatively, they may gift the shares to the charity, thereby receiving a deduction against income tax and exemption from capital gains tax on the deemed disposal. Generally, the latter will afford greater tax relief for the individual donor, provided that they have sufficient income in the year of gift and the shares stand at a gain.
It should be noted that not all charities have the facility to receive shares and other charities might not accept the shares of certain companies on ethical grounds.
In addition to quoted shares it is also possible to gift:
- units in an authorised unit trust
- shares in an open-ended investment company (OEIC)
- an interest in an offshore fund
- a 'qualifying interest in land'.
Gifting shares in an offshore fund subject to income tax can be even more beneficial as the gain is 'washed out' at the 45% tax rate.
Another consideration might include the flexibility of the cash gift aid scheme. It is possible to carry back a charitable donation to the previous tax year provided a claim is made before the tax return for the earlier year is submitted to HMRC. This can be particularly beneficial where marginal rates of tax were greater in the earlier year. Gifts of shares cannot be carried back to the previous tax year.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
