Payrolling your charitable gifts
Northern Ireland is one of the most generous regions of the UK when it comes to charitable giving. But how efficient is your giving?
Do you just put money into any passing collection box that happens to be presented to you in the high street, or are you helping through volunteering, or do you have a direct debit system in place?
Whatever your preferred method, I thought it was time to revisit a topic where some interesting developments have taken place in recent years and that will be of interest both to business owners as well as their employees.
For employees, Payroll Giving means making a regular donation to a charity straight from your pay packet. The donations are deducted before tax is taken and so are tax-free.
For business owners, staff cohesion can be one direct benefit of participating in a Payroll Giving Scheme in addition to showing the business in a good light. The Government has recently introduced a grant for the small and medium enterprise (SME) sector.
When an SME sets up a new scheme (depending on the number of staff employed) the business will qualify for one of the following one-off payments, which can be used in any manner the business owner deems suitable:
- 1-199 employees £300
- 200-399 employees £400
- 400-499 employees £500
The government will also match all employees’ donations £ for £ (up to £10 per month) for the first six months of giving when an employee signs up to the new scheme. This means your donation is doubled.
These figures illustrate how tax effective it is to give through your payroll:
- Monthly gift: £10.
- Cost to donor paying 20% tax: £8.
- Cost to donor paying 40% tax: £6.
- Value of gift with £ to £ matching (first six months of a new scheme): £20.
This applies to small and medium enterprises that initiate new Payroll Giving schemes.
There is a mandatory requirement for an organisation to register with a Payroll Agency in order to set-up a Payroll Giving Scheme.
Registering with an agency is a simple process and your chosen agency will be able to advise you on the best way to set up your payroll system to deduct donations.
The agency will then forward these to the chosen charities.
All agencies are audited by the Inland Revenue due to the tax benefits involved with Payroll Giving. All agencies will also deduct a small fee from each donation (usually 4% of the donation) to cover their administration costs.
There has been some innovative use of the scheme. Royal Mail and its link with the Woodland Trust is one good example.
Here, the main objective was to use payroll giving to enable staff of Royal Mail Group to offset their personal carbon emissions and support the Woodland Trust by planting trees as well as looking at ways of reducing their carbon footprint.
A carbon off-set payroll giving product entitled ‘Owl' (but known as Ollie) is used by individual staff to calculate their annual carbon footprint. It gives reduction tips and tells the individual the cost of off-setting their emissions, how many trees they would need to plant to achieve it and the monthly contribution they need to give to ensure this target is achieved.
If the individual agrees to offset this amount, Ollie collates the information needed to complete the payroll giving form and set up a monthly donation. The pilot study saw 130 donors recruited, delivering an annual charity donation of £8,000.
If you are interested in finding out more there is a local office here that can help both employers and employees.
Telephone (028) 9185-9561 for some comprehensive assistance.
Nicholas Watts is an independent financial adviser with Positive Solutions Financial Services which is regulated by the Financial Services Authority. To contact him, use the website www.realwealthmanagers.co.uk