Irish people are probably the most generous in the world. When it comes to decent causes, we have deep pockets and equally generous hearts. Fortunately and despite the recession of 10 years ago, prosperity is back again…the Bull market ( a rising stock market ) continues – after 8 years, it is now the 2nd longest in history. Consumers have more money in their pockets, more money to donate.
When it comes to inheritance and philanthropy, there is a very fine line between the two. Those with wealth to pass on are hoping the next Budget will increase the Capital Acquisition Tax thresholds for parents to their children. Currently it is at € 310,000 but in April 2009, it was € 542,000! Over this limit, tax is payable at 33%.
Between the increasingly booming economy, increasing value of residential and commercial property money is back in plentiful supply for some. As they say, you can’t bring it with you and so one of the beneficiaries of your inheritance are the many charities vying for your money.
All charities are currently under greater scrutiny than ever with increased powers being given to the Charities Regulator to weed out those who are unfairly, illegally or fraudulently profiting from donors’ generosity.
Quite right too - if you are to donate your hard earned money to whatever deserving charity, you want to be sure it is being used for the purpose you gave it. With the near weekly scandals and exposés on charities over the last few months and years, sadly all charities are affected by the media witch hunt. That still should not stop you from donating.
There are many ways of donating in particular where it is beneficial to the charity and to you the taxpayer. Bequeathing some or all of your assets including cash on your passing to your favourite registered charity is the life blood of some of these charities and it should continue – they are doing great and necessary work and you save tax by doing so. There are three kinds of legacy you may leave:
- Pecuniary - A pecuniary legacy is a specified sum of money, determined when the will or codicil is written
- Specific - A specific legacy is the bequest of a particular item of value. This can include stocks, shares, proceeds of a life assurance policy, property, furniture, jewellery etc.
- Residuary - A residuary legacy is the gift of the residue of your estate, or a share of the residue after other bequests to your family and friends have been made and all debts, taxes and expenses have been paid.
However, before you die, you can donate and at the same time, save tax. To qualify for the tax relief, a donation must satisfy a number of conditions:
- It must be in the form of money (cash, cheque or draft or direct transfer into the charity account )
- It must not be repayable.
- It must not confer any benefit on the donor or any person connected with the donor.
- It must not be conditional on, or associated with, any arrangement involving the acquisition of property by the charity or approved body.
What is an "Eligible Charity"?
The tax relief detailed above is only available for donations to Eligible Charities or Approved Bodies. What does this mean? An Eligible Charity is defined by the legislation as any charity within the State, which is authorised in writing by the Revenue Commissioners for the purpose of this Scheme.
In order to qualify for eligible charity status, the charitable organisation:
- must have a charitable tax exemption number or CHY No. and
- must have been in operation for at least three years since being granted the CHY No.
- must make a formal application to Revenue on the form provided Form of application to Revenue for Authorisation as an "Eligible Charity" for the purposes of Section 45, Finance Act, 2001 (donations to eligible charities).
- must meet any other conditions that Revenue may require from time to time
What donations qualify for relief?
The minimum donation in any year that must be made to any one eligible charity or approved body is €250. Donations made by instalments (e.g. Standing Order) will also qualify.
For the purposes of tax relief, and where there is no association between the donor and the charity(s)/approved body(ies) to which the donation is made, there is no maximum qualifying donation.
However, where there is an association between the donor and the charity(s)/approved body(ies) at the time the donation is made e.g. where the donor is an employee or member of the charity/approved body, then relief will be restricted to 10% of the total income of the individual for the relevant year of assessment.
* It must not be conditional on, or associated with, any arrangement involving the acquisition of property by the charity or the approved body.
* Full details of 10% restriction, which applies to donations made on or after 6 February 2003 are set out in the 2003 Finance Act.
Further information can be obtained from Inspector of Taxes, 9/15 Upper O'Connell Street, Dublin 1 E-mail: DIRD@revenue.ie or Phone: (01) 874 6821.
For more information click on John Lowe's profile above or on his website.