Minister reveals tax relief change proposals for charitable donations

“Officials from my Department, the Revenue Commissioners and the Irish Charities Tax Reform Group have been working together on possible options to simplify the relief scheme and thus reduce the administrative burden on charities and the Revenue Commissioners of operating the scheme,” he said.

Section 848A of the Taxes Consolidation Act 1997 provides for tax relief at the donors’ marginal rate of tax (20pc or 41pc) for donations above €250 to approved bodies.

Under the proposed changes, donations from all individual donors under the scheme would be treated in the same manner, with the tax relief in all cases being repaid to the charity. This would mean that self-assessed taxpayers would no longer be able to claim a deduction on their tax returns for donations made under the scheme.

The Minister also proposes to introduce a blended rate of relief that would apply to all taxpayers, regardless of their marginal tax rate. This would involve a rate of refund of around 30pc. All donations would be grossed up as is currently done for donations from individuals within the PAYE collection system.

In addition, the charitable donations scheme would be removed from the scope of the high earners’ restriction, and an annual limit on the amount that could be tax relieved under the scheme of €1m per person would be introduced.

“Even though the simplification proposals are designed to be revenue neutral, I am cognisant that the changes proposed might not be beneficial for all of those bodies that currently receive charitable donations,” said the Minister. “In order to ensure that all of those affected might have an input into the eventual policy decision in this matter, I have decided to engage in a public consultation process.”

The public consultation will be open for submissions from today and will close on 11 of May 2012. Submissions may be emailed to charities@finance.gov.ieor sent by post to ‘Donations Scheme Consultation’, Income Tax Incentives, Financial Services and Taxation Division, Department of Finance, Government Buildings, Upper Merrion Street, Dublin 2.