CG66630 | Capital Gains Tax and Gifts: Exemptions and No Gain/No Loss: Income Tax and Corporation Tax Relief for Gifts of Certain Assets to Charities

Since 6 April 2000 individuals and companies have been able to claim income or corporation tax relief on gifts to charity of certain shares, securities and other investments. The rules for these are contained in ITA07/PT8/CH3 and CTA10/PT6/CH3. Detailed guidance is available in within on gov.uk.

It is important to note that the recipient of the gift must be a charity. The other bodies listed in IHTA84/SCH3, see CG66620, do not qualify.

If the donor is eligible for Income Tax or Corporation Tax relief under these provisions, TCGA92/S257(2A) to (2C) reduces the charity’s acquisition cost by the amount of the relief. There is no requirement that the relief is actually given. If the available Income Tax or Corporation Tax relief is greater than the charity’s acquisition cost that cost is reduced to nil. This is likely to be the case, if the assets are gifted, as shown in example B below.

Example A

Lawrence owns shares in Ziggy plc, a quoted company, which he acquired at a cost of £18,000. He sells the shares to a charity for £30,000 when they are worth £50,000, incurring £50 in transaction fees. Lawrence can claim Income Tax relief of £20,050 (£50,000 + £50 - £30,000). The charity’s acquisition cost is reduced by the amount of the Income Tax relief, £20,050, giving it an acquisition cost of £9,950.

Example B

Instead of selling the shares at undervalue, Lawrence gifts the shares, again incurring transaction fees of £50. As an expression of its gratitude the charity gives Lawrence tickets to an event worth £500. Here, Lawrence can claim Income Tax relief of £49,550 (£50,000 + £50 - £500). For Capital Gains Tax purposes, Lawrence is treated as disposing of the shares for no gain/no loss (£18,050). Normally, this would also be the charity’s acquisition cost but this is reduced to nil because of the Income Tax relief of £49,550.