The First Delegated Legislation Committee has approved the Devolved Income Tax Rates (Consequential Amendments) Order 2018.
The order makes changes to ensure that Welsh taxpayers obtain certain tax reliefs, or are taxed on certain types of income, at the appropriate Welsh rates once Welsh rates of income tax come into effect.
The way that Gift Aid will operate under these circumstances will be that the charity, or the recipient, of the gift will receive relief at the UK rate, that being 20%, as the current basic rate tax is set at that level. The relief that will fall due to the donor under those circumstances, given that they would be a Welsh taxpayer, would be the difference between that and whatever the Welsh higher tax rate or additional tax rate was at that time. At the moment there is no change about to occur due to the decisions taken by the Welsh Assembly in respect of its own tax rate.
In the case of charitable donations under Gift Aid rules and residuary income from deceased estates, the Government is taking this opportunity to make similar changes to ensure that Scottish taxpayers are taxed or entitled at the correct rate in the event of the Scottish basic rate differing from that in the UK.Details on the Scottish Government’s tax rates can be read here.
The full explanatory note can be read here.
- Article 12(8) inserts a new section 414A into Chapter 2 of Part 8 of ITA which deals with relief for gifts to charity where the main basic rate and devolved basic rates differ. The background is that Gift Aid donations received by charities will continue to treated as amounts received after deduction of tax at the main basic rate (even in the case of Scottish and Welsh taxpayers), with charities being able to reclaim tax at that rate from HMRC.
- New section 414A(3) ensures that where the Scottish basic rate or Welsh basic rate is higher than the main basic rate, the donor of a Gift Aid donation is effectively taxed only at the main basic rate on so much of the grossed-up donation as would otherwise be more heavily taxed at the Scottish, or Welsh, basic rate. New section 414A(4) ensures that where the Scottish basic rate or Welsh basic rate is lower than the main basic rate, the donor of a Gift Aid donation is effectively taxed at the main basic rate on so much of the grossed-up donation as would otherwise be more lightly taxed at the Scottish, or Welsh, basic rate. But new section 414A(5) ensures that new section 414A(4) does not make a donor worse off as a result of having made Gift Aid donations.
The amendments follow as closely as possible the situation already in place for Scottish taxpayers, providing consistency of treatment of taxpayers across the United Kingdom to the extent that the different devolution settlements allow. Further background can be found here.