Payroll giving
Encyclopedia
Payroll Giving or Give As You Earn (GAYE) - Is a tax free way for UK tax payers to give money to UK Registered Charities
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Introduced in 1987, Payroll Giving is a simple, tax efficient scheme which allows employees to give money to the UK registered charity of their choice by having a deduction
taken straight from their gross pay. There is no tax for the charity to claim back as no tax was deducted.
Some companies match or part match their employee donations via Give as You Earn.
Payroll giving is operated by several agencies which do the administration and processing to link the donations to the correct charities. Employers have to choose which agency to operate with and may not pay the charities directly.
, as Gift Aid assumes all donations are from Basic rate Taxpayers (20% rate).
It is nonetheless possible to achieve the same result using Gift Aid, regardless of which tax band the donor is in, because the Gift Aid scheme allows higher rate taxpayers to reclaim the difference between higher and basic rate taxes. For example, if a donor gives £80 via Gift Aid, this is equivalent to donating £100 via Payroll Giving. In both cases, the benefit to the charity is £100 (disregarding the Transitional Relief payable until April 2011). The cost to a basic rate taxpayer is £80 in both cases, as the £100 paid by Payroll Giving would otherwise have been taxed at 20%. The cost to a higher rate taxpayer is £60 for the Payroll Giving donation (£100 less 40%), and initially £80 for the Gift Aid donation, although the higher rate taxpayer can later reclaim the £20 difference through his/her tax return.
policy, Payroll Giving offers employees the opportunity to channel their support for their social concerns whilst at the same time demonstrating the company’s credentials as a socially responsible business. Employers with high participation rates can win Bronze, Silver and Gold awards from the Government
Charity Commission
The Charity Commission for England and Wales is the non-ministerial government department that regulates registered charities in England and Wales....
.
Introduced in 1987, Payroll Giving is a simple, tax efficient scheme which allows employees to give money to the UK registered charity of their choice by having a deduction
Tax deduction
Income tax systems generally allow a tax deduction, i.e., a reduction of the income subject to tax, for various items, especially expenses incurred to produce income. Often these deductions are subject to limitations or conditions...
taken straight from their gross pay. There is no tax for the charity to claim back as no tax was deducted.
Some companies match or part match their employee donations via Give as You Earn.
Administration
More than 10,000 employers in the UK currently operate the scheme, and circa 2% of UK employees participate. Participating employers deduct agreed sums of money from their employees pay before calculating tax, and forward the money to a payroll giving agency; the agency then distributes the money to registered UK charities in accordance with the employees wishes (minus an administration fee, which may vary considerably between agencies).Payroll giving is operated by several agencies which do the administration and processing to link the donations to the correct charities. Employers have to choose which agency to operate with and may not pay the charities directly.
For Donors
The UK has a progressive Income Tax system with a top rate in 2011 of 50%. For higher rate tax payers this is a simpler way to donate to charity tax effectively than Gift AidGift Aid
Gift Aid is a UK tax incentive that enables tax-effective giving by individuals to charities in the United Kingdom. Gift Aid was originally introduced in Finance Act 1990 for donation from 1 October 1990, but was originally limited to cash gifts of £600 or more...
, as Gift Aid assumes all donations are from Basic rate Taxpayers (20% rate).
It is nonetheless possible to achieve the same result using Gift Aid, regardless of which tax band the donor is in, because the Gift Aid scheme allows higher rate taxpayers to reclaim the difference between higher and basic rate taxes. For example, if a donor gives £80 via Gift Aid, this is equivalent to donating £100 via Payroll Giving. In both cases, the benefit to the charity is £100 (disregarding the Transitional Relief payable until April 2011). The cost to a basic rate taxpayer is £80 in both cases, as the £100 paid by Payroll Giving would otherwise have been taxed at 20%. The cost to a higher rate taxpayer is £60 for the Payroll Giving donation (£100 less 40%), and initially £80 for the Gift Aid donation, although the higher rate taxpayer can later reclaim the £20 difference through his/her tax return.
For Employers
As part of a broader corporate social responsibilitySocial responsibility
Social responsibility is an ethical ideology or theory that an entity, be it an organization or individual, has an obligation to act to benefit society at large. Social responsibility is a duty every individual or organization has to perform so as to maintain a balance between the economy and the...
policy, Payroll Giving offers employees the opportunity to channel their support for their social concerns whilst at the same time demonstrating the company’s credentials as a socially responsible business. Employers with high participation rates can win Bronze, Silver and Gold awards from the Government