You could run 26 miles for charity, or you could let the taxman do all the legwork

As thousands get ready for next Sunday's London marathon, Wilson Cotton shows how to make their donations go further
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The Independent Online

A week today, tens of thousands of hardy souls will tackle a gruelling 26.2-mile road race around London.

A week today, tens of thousands of hardy souls will tackle a gruelling 26.2-mile road race around London.

Apart from those dedicated athletes aiming for a personal best in the capital's famous marathon, most runners will be hoping to get across the line in one piece, if not a respectable time.

And the likely fuel for many as they break through countless pain barriers will be the thought of money raised for charity after they've tapped all their friends and family for sponsorship pledges. Millions of pounds are expected to be raised to help fund bodies devoted to caring for the ill, sick and homeless.

However, for those who don't feel they have to punish their bodies to discover their souls, there are easier ways to raise money for charity.

It is estimated that UK charities receive donations totalling £6bn each year, but they could benefit even more from our gifts if we always used the available tax breaks.

The most important of these is Gift Aid, a scheme that lets donors make payments in the knowledge that, for every pound given, the charity will get a further 28p from the Inland Revenue. In February, research revealed that charities missed out on nearly £400m last year because people gave money on the spur of the moment - to street collectors, say - rather than through these planned, tax-efficient donations.

Gift Aid will shortly be given another boost thanks to a new way to donate money via your tax form. This scheme will apply to the 2003-04 self-assessment returns, soon to be sent out, and let people who are due a rebate from the taxman pass this on directly to their chosen charity.

As well as this payment, the charity will get the tax credit due from the Gift Aid scheme.

However, some practical issues still need to be addressed. To participate in the scheme, a charity has first to register its involvement with the taxman. And out of the 300,000 registered charities in the UK, only 35,000 have done this so far.

Making a donation using this method can also cause confusion since you will need to quote the charity's Revenue reference number on your tax return, and this is different to the Charity Commission registration number.

For example, Oxfam's number with the Charity Commission is 202918 but its Revenue reference is MAE66TG. However, the Revenue's website will contain all the appropriate information in time for the new scheme.

Remember, also, that you can't reclaim such a donation once you have made it.

Cash may be the most popular form of charity giving but many people don't realise that you can also get tax relief on gifts of property and investments such as shares.

No capital gains tax is due when you dispose of these and you may be eligible for income tax relief too.

But be aware that the Revenue might want to see documents as evidence of the gift before agreeing its value.

Meanwhile, it has become more common for the taxman to inquire into Gift Aid claims, particularly where the total shown on a return is significant.

You will usually have to give a detailed breakdown of individual sums claimed, along with copies of each Gift Aid certificate. Obtaining duplicates can be costly and time-consuming both for the taxpayer and the charity, so keep a copy of the forms where you have agreed to make payments under Gift Aid.

Another easy, tax-efficient way to give money is through your employer's payroll. More than 9,000 businesses already offer a "payroll giving" option to some five million British employees, who can agree to donate a percentage of their salary. These figures are set to rise as a new payroll-giving grant will soon be introduced to encourage smaller companies to offer the scheme to employees.

In 2002-03, more than £86m was raised in the UK through payroll giving. The benefits of the scheme are that charities get a regular source of income, and donors receive immediate tax relief at their top rate of tax.

And as the scheme is operated through independent agencies, donors can change the recipient charity at any time and keep their choice of beneficiary confidential.

Finally, remember that any legacy to a charity is free of inheritance tax, though, for the sake of simplicity, leave a specific amount rather than a share of any "residue" estate left over after you've taken care of your family.

Don't forget to review your will regularly to ensure that your legacy is affordable and that it continues to reflect your wishes. For example, you may decide to change your choice of charity or leave more money to your family instead.


Wilson Cotton is a partner at Smith & Williamson, the independent professional and financial services group. Contact 020 7637 5377 or

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