Employment Tax

Payroll giving

Produced by Tolley in association with Vince Ashall
  • 22 Dec 2021 14:33

The following Employment Tax guidance note Produced by Tolley in association with Vince Ashall provides comprehensive and up to date tax information covering:

  • Payroll giving
  • Payroll giving and tax relief
  • How payroll giving works
  • Signing up with a payroll giving agency
  • Employees joining the scheme
  • Deducting donations from pay
  • Paying over donations to PGA
  • PGA administration costs
  • Employees leaving the scheme
  • Employer’s record keeping
  • More...

Payroll giving

Payroll giving is a highly tax-effective method of giving to charity, and uniquely gives employers a platform to encourage and champion philanthropy among their employees. There is no mandatory requirement for employers to set up a payroll giving scheme or for employees to participate.

Payroll giving and tax relief

Payroll giving schemes are commonly referred to as give as you earn (GAYE). They allow employees to make donations to any approved charity direct as a deduction from pay and receive tax relief on the contributions, regardless of the amount donated (there are currently no statutory lower or upper limits). Pensioners can also use payroll giving to give to charity by direct deduction from their occupational pension.

Originally, an employee could only make donations to UK charities, but following the decision in Hein Persche v Finanzamt Lüdenscheid, UK tax reliefs for charities were extended to eligible organisations equivalent to UK charities in the European Union and the European Economic Area countries of Norway and Iceland. This is reflected in the definition of charity given in FA 2010, Sch 6, Part 1 and SI 2010/1904.

The primary legislation on payroll giving is in ITEPA 2003, ss 713–715. The principal regulations are The Charitable Deductions (Approved Schemes) Regulations 1986, SI 1986/2211.

How payroll giving works

In considering setting up a payroll giving scheme, employers might want to ask a charity or a local group of charities to come into the workplace and talk to employees about the benefits of payroll giving. Alternatively, employers could invite a

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