Taxpayers who make donations to charities in other countries can qualify for tax relief in the UK under certain circumstances. This means that UK charitable tax reliefs are available to certain organisations which are the equivalent of UK charities and Community Amateur Sports Clubs (CASCs) in the EU, Norway, Iceland and Liechtenstein (referred to as the EEA) provided they meet the UK tax definition of a charity. The charity would also need to be recognised by HMRC in order for taxpayers to claim relief.
The treatment of donations to charities outside the EEA area is different and in most cases the donations do not qualify for tax relief as the charities are not recognised entities for charitable purposes. For this reason, many large foreign charities that attract donations from the UK may decide to register with the Charity Commission in England and Wales. There are different rules in Scotland and Northern Ireland. This is quite a complex area and there are many requirements that must be met in order to register as a charity.
If the charity meets the UK definition of a charity, then UK higher rate or additional rate taxpayers, will be entitled to claim relief on the difference between the basic rate and their highest rate of tax made on an eligible donation.
For example:
If a taxpayer donated £5,000 to charity, the total value of the donation to the charity is £6,250. They can claim back additional tax back of:
- £1,250 if they pay tax at the higher rate of 40% (£6,250 × 20%),
- £1,562.50 if they pay tax at the additional rate of 45% (£6,250 × 20%) plus (£6,250 × 5%).
Higher rate or additional rate taxpayers have the option to carry back charitable donations to the previous tax year. A request to carry back the donation must be made before or at the same time as the previous year’s Self-Assessment return is completed.