Government issues guidance on tax relief caps

The Treasury and HM Revenue & Customs have issued new guidance explaining how a new cap on tax reliefs for charitable giving will work, which confirms the government's belief that donors should pay tax on large donations. The government announced in last month's Budget that, from April 2013, anyone donating more than £50,000 a year or a quarter of their income, whichever is higher, will not be able to reclaim all the tax they have paid on their donations. The new guidance confirms that any money claimed by the charity under Gift Aid will be considered part of the donation. In practice, this means that a donor earning £200,000 or less a year giving anything over £40,000 could be affected by the cap, even if they claim no other tax reliefs. HMRC also confirmed that any Gift Aid claimed by the charity would be subtracted from the amount a donor could claim under the cap. This means that if a donor gives so much that Gift Aid was more than the total tax relief they could claim under the cap, they would have to pay back the tax claimed by the charity.