How the tax relief works

How the tax relief works:

There are two elements: income tax relief and exemption from capital gains tax.

Income tax

Since 6 April 2000 individuals have been able to claim income tax relief on gifts to Latymer of most shares and securities. They simply deduct the value of their donation from their taxable income for the tax year in which the donation is made (a tax year runs from 6 April to 5 April of the following year). This is how to calculate the amount of tax relief:

• Work out the market value of the shares on the day of the gift
• Add any associated costs of transferring the shares, such as broker’s fees.
• Deduct the value of any benefits received as a result of making the gift to the charity – at Latymer this would be £0.

Example

A Latymerian Donor gives 2,000 shares in a company quoted on the London Stock Exchange, each worth £5 on the day the gift is made. The market value of the shares is, therefore, £10,000. The broker’s fee, paid by the donor to arrange the transfer, is £50. The tax deduction is calculated as follows:

                        Market value of shares                          £10,000

                        Plus the broker’s fee                             £50

                        Deduction against income                      £10,050

Assuming that the donor is paying income tax at the higher rate of 40%, their income tax bill will be reduced by (£10,050 @ 40%) £4,020. This means that the donation of £10,000 to Latymer will actually cost the donor just £6,030 after tax relief (£10,050 -£4,020).

Donors should normally claim their tax relief by completing the appropriate section of their tax return. If they are not sent a tax return or they want to claim relief before the end of the tax year, they should contact their tax office giving full details of the gift, and the office will arrange for the relief to be given.

The income tax relief is in addition to any exemption from capital gains tax that may also be available to the donor (see next section).

All tax relief goes to the donor of the shares. There is no tax relief (i.e. Gift Aid) for charities to claim on the gift.

Capital Gains Tax

Normally, when someone sells shares (of all types) and other assets that have increased in value since they were acquired, they make a capital gain. If the amount of their gains is above a certain limit each year, they may be liable to capital gains tax. When shares are sold which have gone down in value since they were acquired, there will be a capital loss. A capital loss can normally offset other capital gains. The position is different however when shares are given to Latymer. In this case there is an exemption from capital gains tax on gains. But a loss on a charity gift cannot be used to offset the tax on the donor’s other chargeable gains.

Capital gains tax is a complex subject and the position will depend upon each individual’s own circumstances. The Latymer Upper School Development Office cannot attempt to give any advice about capital gains tax. Donors are encouraged to speak to their own accountants or financial advisers.

The examples provided are for illustrative purposes only. The tax benefits you may be entitled to will depend on your personal circumstances. You should always seek advice from your tax adviser. The Inland Revenue may be a useful starting point.

More information

If you would like to talk to someone about donating shares to the Latymer Foundation, please contact Amanda Scott in the Latymer Development Office on 0845 638 5965 or email ams@latymer-upper.org

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• Donating shares to Latymer 
• Frequently Asked Questions about donating shares to Latymer
• How do I donate my shares to Latymer?