SVR General Discussion

One thing of note is that the Resilience Fund is through the Guarantee Company rather than the Charitable Trust and therefore not eligible for Gift Aid.

 

News of the SVR Resilience Fund. <BJ>

''The Severn Valley Railway is a living museum; it transports you into the past, creates memories and puts a smile on your face.
But operating a heritage railway costs a huge amount of money. Because of rising costs and falling visitor numbers post-Covid, the SVR will need ongoing support for some time to help meet its running costs, and build resilience for the future.
Is the SVR precious to you? Do you want to make sure it’s here for future generations to experience? You can https://svr.co.uk/resilience/''

 

If that is correct it is a surprising choice. Anyone who can afford to donate at all is probably liable to at least a 20% marginal tax rate, where a net (to the donor) £80 donation gives a charity £100. For anyone on a 40% marginal tax rate, a mere £60 donation gives the charity £100.

 

There are restrictions on how charities can give to companies. If the donations are genuinely for general spending by the company, then this may be better than a situation where the Charitable Trust is constrained in how it can give to the company, and donations end up not being able to be used for what people thought they'd given them for. And that's assuming the sort of creativity and goodwill that ought to be in place for such support between such organisations.

 

That's not quite how it works. The railway always gets 20%. If you pay 40% tax, then _you_ can claim the other 20% back. The railway can't possibly know your tax rate, so would have not way to claim back anything above 20%.
If you pay 40%, then donate 20% more, the railway claims 20%, and you get 20% back to cover the "more"
(Before anyone says ... yes .... I've paid a bit fast-and-loose with percentages here - it's fractional more complicated - but the jist is right.)

 

Yes, as I understand it, for a railway to get a total benefit of £100 out of each of two taxpayers:

• Person A, who pays at the lower rate needs to donate £80. The railway can then reclaim £20 in Gift Aid to make a total benefit to them of £100
• Person B, who pays at the higher rate also needs to donate £80. The railway claims £20 Gift Aid as before, again making the benefit to the railway £100. Meanwhile, the donor can reclaim £20 as a tax rebate if they do a self assessment tax return. So the end result is that the cost to Person B to create the same £100 benefit is only £60 - but that is made up by donating £80 and getting £20 back as a tax rebate.

In each case, it is dependent on the donor paying at least as much tax as is being reclaimed.

Tom

 

I think we’re overthinking this, omitting the real world question of cashflow.

I am a higher rate taxpayer. I include my donations in my tax return. I prepare that annually, sometime in the period between 6th April and the Self Assessment deadline of 31st January. It is a gross number for my donations, and it goes into a much more complicated assessment of whether I owe HMRC money, or vice versa. As a paid employee on PAYE, the outcome of that tends to come through my tax code.

That whole rigmarole means that I do not factor in the gap between basic and higher rates to my donation, and gross up the full benefit. It does mean that my starting £100 may actually be a bit more, because I’ve a little more “spare” than I might have had.

As a Gift Aid administrator for my church, I have never had any experience of people seeking to gross up between basic and higher rates. I have, occasionally, had the experience of someone donating towards a particular purchase and saying “if that will cost you £100, and I Gift Aid it, is a donation of £80 ok”. To which my answer is always “of course, but we’d be delighted to accept more!”.


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And then you get people like me who was a higher rate tax payer who never put any details on his tax form about any gift aid payments. Farr too difficult to remember the odd thing here or there.

 

That too!

Also worth note, being really pedantic, that it is possible (and worthwhile) for higher rate taxpayers to declare Gift Aid even where they aren't on Self Assessment.

 

Agreed, and I know I should stop, but I was actually doing it the other way round to maximise railway benefit:

• At lower rate (20%) - Person A donates £80, the railway gets £100 in total, and it costs the person £80.
• At higher rate (40%) - Person B donates £106.66, the railway gets £133.33 in total, and after a tax saving it still only costs the person £80.

And if you happen to hit the marginal rate of 60% between £100K and £124K income, the numbers go up again, and make it even more beneficial to the railway.

 

Thank you for the explanation.

As someone who deals with that administration and submission, I'm a little concerned about the views expressed on effort - they discount the real value that Gift Aid can provide, and given that most of those requirements already exist for normal record keeping, I would recommend that the SVR look at how it can enable itself to make use of Gift Aid.

 

(My bolding added.) I'd add "...or can do so." Take a woman I know: retired after spending most of her life as a housewife, working later in life but not enough to bring her total pension income above the tax threshold, married to a man on a full employer's pension. She is not poor as such, and is able to help various charities etc, but if she wishes to donate she has two options: 1) donate without GA, which some organisations (not the SVR) can be a bit pushy about and make her feel "less valued" - she's said this directly to me, or 2) ask her husband to make the donation as though it were the 1950s so that GA can be applied.

I'm perfectly willing to accept that the benefits of GA often outweigh the drawbacks, but sometimes people talk as though there were no issues at all and that is not the case. Any good board will consider stuff like this, and things like potential changes to tax rules ("what happens if the threshold is suddenly raised by £5k?") and I'm pleased and reassured to see Sidmouth's comments on there being "much discussion". This is the sort of thing that, although I'm not in the situation of the woman I mention, makes me more likely to donate to the SVR.

 

A very good point about thresholds - if someone is on the basic state pension, they are unlikely to have much allowance to apply Gift Aid to.

However, I have spent the last 10 years administering Gift Aid, including discussing thresholds and the role of household income with donors. I have yet to meet anyone who has presented in the manner of your acquaintance; I have met many who have been delighted to know that where income is donated by a couple, it can be associated to the taxpayer even if the decision is made by the non-taxpayer (my wife frequently tells me that I have donated £x to a cause...).

Ultimately, however, my key message to any donor is that I am grateful for whatever they give, be it the proverbial "widow's mite" or a large sum. Gift Aid is the icing on the cake - something that I need to keep an eye on and at times remind others of.

 

A very fair and informed reply. Thank you.

 

June edition of Branch Lines

https://www.svrlive.com/bljun24

 

Until recently, I paid neither income tax nor NI due to the way my company operates. It is very common in the tech sector to pay a minimal salary below the NI/PAYE threshold and top up your earnings with dividends, which is much more tax-efficient. So Gift Aid is a no-no in those circumstances.

Now I'm taking a pension from my former employer, it attracts PAYE so I can tick that all-important box.