MANY individuals are prepared to give quite substantial sums to charity and usually gifts are made in cash with the benefit of gift aid.
Individuals who have investments but limited cash resources, commonly described as asset rich/cash poor, may feel unable to donate as generously as they might otherwise wish.
The Government recognised this and expanded the types of gift that would attract tax relief to include gifts to charity of land and quoted stocks and shares.
For example, Geoffrey is a pensioner and while his income is fairly modest, he owns a substantial portfolio
MANY individuals are prepared to give quite substantial sums to charity and usually gifts are made in cash with the benefit of gift aid.
Individuals who have investments but limited cash resources, commonly described as asset rich/cash poor, may feel unable to donate as generously as they might otherwise wish.
The Government recognised this and expanded the types of gift that would attract tax relief to include gifts to charity of land and quoted stocks and shares.
For example, Geoffrey is a pensioner and while his income is fairly modest, he owns a substantial portfolio of stocks and shares with most of the holdings showing a healthy profit. He would like to donate £30,000 to his favourite charity but feels he does not have the spare cash to fund the donation. If he sold one of his shareholdings to raise the cash he knows he would be required to pay capital gains tax (CGT) on the disposal, thus depleting the sum that can be donated.
His accountant recommends that he ask the charity if it will accept a transfer of one of his shareholdings, currently worth £30,000. The charity readily accepts the offer knowing that it can immediately sell the shares and pay no tax on the proceeds. For Geoffrey, the transfer will be exempt from CGT in his hands, so he will have no tax to pay on the gift.
The attractiveness of this type of arrangement for Geoffrey does not stop there as he can receive a deduction against his income up to the value of £30,000 in calculating his annual income tax liability.
While the income tax relief might not be uppermost in Geoffrey’s mind, for other types of taxpayer this could be particularly significant.
For example, if Dorothy, whose income is considerable and pays tax at the top rate of 45 per cent, was to transfer £20,000 of quoted shares which are standing at a profit to charity she would obtain an income tax deduction of up to £9,000 and pay no CGT.
Planning can work to the advantage of taxpayers whose tax-free personal allowances are reduced because of the size of their income e.g. pensioners whose income exceeds £27,000 or individuals generally whose income is in excess of £100,000 annually. A reduction in income by transferring qualifying investments to charity may secure a higher personal allowance.
For more information on this or other forms of tax planning contact Keith Weston on 01536 514871 or email him at