Meet our Expert

Lizzie_JonesLizzie Jones – Associate, Farrer & Co

Lizzie joined Farrer & Co as a solicitor in 2007, after training at Baker & McKenzie. Lizzie advises sponsors of new charities, directors, trustees and officers of existing charities and other not-for-profit bodies, as well as individuals and companies wishing to make charitable gifts or do business with charities.

 

“If I give a property to a charity, what is my tax position as a high rate tax payer?”

The answer

Income tax relief is available to individual donors giving property to a charity. As well as being able to claim a deduction from your income tax bill, there is also an exemption from having to pay any capital gains tax that would have otherwise arisen on the disposal of the property.

The availability of income tax relief is subject to specific conditions, and I would suggest you take advice to ensure that the gift you have in mind meets these conditions. The main conditions are that:

  • the property you are giving is in the UK and the gift is a freehold or leasehold interest in land; and
  • once the charity owns the property, you have no ongoing rights in the property (for example, you do not continue to live in the property).

Once you have made the gift you will need to ask the charity to provide you with a certificate confirming the details of the gift.

The total value of the relief in broad terms is the value of the land you give to the charity and the costs you incur in making the gift less any benefits you receive in return. The figure you are left with is the amount of income tax relief you will be entitled to in the tax year you make the gift. This relief can be deducted from your income tax bill (but not from your capital gains tax bill) in that tax year, but the relief cannot be carried back or forward for use in any other tax year.

Although this appears to be (and indeed often is) a valuable relief, it is important not to assume that it will be the optimum relief. In some circumstances it can be more efficient to sell the land and give the donation in cash, but this will depend on a large number of factors including the size of any gain that has been made on the property and your own personal tax position. It is always worth doing the sums to check what is the most efficient way for you to make the gift.

Please note: This advice column is a statement of the general position and should not replace tailored advice.