What are the tax implications of giving to charity?

It was reported last month that the chief executive officer of a publicly listed Irish company had donated a block of shares to a charity. Am I correct in thinking that such a gift is exempt from capital gains tax on the donor?

Is there an upper limit to such a tax-free gift to a charity? Can the gift be a property? Some older charities are “trusts” rather than companies limited by guarantee. Does this create any legal difficulties?

Mr D McC, Dublin

Charities rely heavily on donations and there are specific rules in place to ensure that they can benefit from tax relief in relation to donated cash, assets and property.

While cash is generally easier for charities to handle, and requires less administration, there is nothing stopping a person choosing instead to donate shares in a listed company, or indeed physical property.

The rules governing such charitable giving are set down in section 848A of the Taxes Consolidation Act 1997. The most recent amendment of this regime was in the 2013 Finance Act.

Following that, the position is that an individual may engage in tax-efficient gifting to an “approved charity” as long as the donation exceeds €250 in any given year.

Would you charge your daughter interest on a loan?

---

AIB shares and irrational exuberance

---

Turning a parental loan into a gift

---

Making sense of my Apple shares

---

Yes, there are upper limits but they are fairly generous. As a general rule, the upper limit on charitable gifting is €1 million per tax year. If a person is connected to the charity involved, a separate limit of 10 per cent of their income is imposed.

Straightforward

Where cash is involved, the relief is straightforward – income tax relief. Where, before 2013, income tax relief was available at a taxpayer's marginal rate, a "blended" 31 per cent rate now applies.

With gifts of shares, the donor can choose either income tax relief or CGT relief. The former will likely deliver a greater return for the charity but leave the donor with a potential capital gains tax liability; the latter means the donor has no tax liability and the benefit to the charity is the market value of the shares at the time of donation.

In relation to physical property, a donation is deemed to be at the price originally paid, creating no tax liability for the donor. However, the value to the charity is the market value of the property. They can even sell the property without tax liability as long as any proceeds are used for the approved charitable purposes of the organisation.

So, if you paid €200,000 for a house and handed it over to a charity years later when it was worth, say, €350,000, the donation is deemed to be €200,000 (plus any costs associated with the purchase). The charity gets an asset worth €350,000.

Whichever option you choose, there is a certain amount of paperwork involved as Revenue clearly wants to avoid any abuse of the scheme, but it is not onerous.

Finally, in relation to who is eligible to receive donations benefiting from tax relief, the Revenue has a list of “authorised charities” that can benefit from the scheme. It is available on the Revenue website and numbers more than 2,450.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice

Charities rely heavily on donations and there are specific rules in place to ensure that they can benefit from tax relief in relation to donated cash, assets and property.

While cash is generally easier for charities to handle, and requires less administration, there is nothing stopping a person choosing instead to donate shares in a listed company, or indeed physical property.

The rules governing such charitable giving are set down in section 848A of the Taxes Consolidation Act 1997. The most recent amendment of this regime was in the 2013 Finance Act.

Following that, the position is that an individual may engage in tax efficient gifting to an “approved charity” as long as the donation exceeds €250 in any given year.

Yes, there are upper limits but they are fairly generous. As a general rule, the upper limit on charitable gifting is €1 million per tax year. If a person is connected to the charity involved, a separate limit of 10 per cent of their income is imposed.

Straightforward

Where cash is involved, the relief is straightforward – income tax relief. Where, before 2013, income tax relief was available at a taxpayer’s marginal rate, a “blended” 31 per cent rate now applies.

With gifts of shares, the donor can choose either income tax relief or CGT relief. The former will likely deliver a greater return for the charity but leave the donor with a potential capital gains tax liability; the latter means the donor has no tax liability and the benefit to the charity is the market value of the shares at the time of donation.

In relation to physical property, a donation is deemed to be at the price originally paid, creating no tax liability for the donor. However, the value to the charity is the market value of the property. They can even sell the property without tax liability as long as any proceeds are used for the approved charitable purposes of the organisation.

So, if you paid €200,000 for a house and handed it over to a charity years later when it was worth, say, €350,000, the donation is deemed to be €200,000 (plus any costs associated with the purchase). The charity gets an asset worth €350,000.

Whichever option you choose, there is a certain amount of paperwork involved as Revenue clearly wants to avoid any abuse of the scheme, but it is not onerous.

Finally, in relation to who is eligible to receive donations benefiting from tax relief, the Revenue has a list of “authorised charities” that can benefit from the scheme. It is available on the Revenue website and numbers more than 2,450.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.