Rules on waiving income or donating to charities
27/05/2020

HMRC has published a new press release that provides some advice for people choosing to give up their income to support their business or donate to charity during the Coronavirus (COVID-19) pandemic.

Employers, directors and employees have several options to support a business or employer, including:

  • Waiving their salary or bonuses before they are paid. A ‘waiver of remuneration’ happens when an employee gives up rights to remuneration and gets nothing in return. If an employee and employer agree to a reduction in the employee’s remuneration before they are paid, for example to support company cashflow during the pandemic, then no Income Tax or National Insurance contributions (NICs) will be due on the amount given up.
  • Waiving the right to any dividends. This can be actioned by directors or other shareholders, including employees. a Deed of Waiver must be formally executed, dated and signed by shareholders and witnessed and returned to the company. The waiver must be in place before the right to receive a dividend arises.
  • Giving salary or dividends back to their employer after they have been paid. It is not possible to claim back the Income Tax and NICs that would already have been deducted from the salary or bonuses on payment.

There are also options to donate to charities. The Payroll Giving scheme allows employees to make a tax free donation to charity directly from their pay if their employer runs a payroll giving scheme which has been approved by HMRC.

Gift Aid Donations allow charities and community amateur sports to claim 25p worth of tax relief on every pound donated. Higher rate or additional rate taxpayer can claim additional tax relief on the difference between the basic rate and their highest rate of tax.