EXPLANATORY NOTE

1. This Clause provides for the payment of a ten per cent supplement on donations to charity through payroll deduction schemes for three years from 6 April 2000. It also removes the maximum limit on the amount of donations which may be made through such schemes from 6 April 2000.

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2. Subsection (1) provides that where donations are made to charities under an approved payroll giving scheme and the agent is to pay those donations to other charities, the agent will pay a ten per cent supplement on those donations to the charities within a period prescribed in Treasury regulations.

3. Subsection (2) provides for agents to claim the supplement from the Inland Revenue out of money provided by Parliament to

• fund supplement due to be paid by them to other charities,

• reimburse them for supplement already paid to other charities but not funded in advance, or

• fund supplement due on donations to which they are themselves entitled as nominated charities.

4. Subsection (3) provides for regulations to be made by the Treasury to require an agent to report any failure to comply with subsection (1) above, and to keep records of the supplement. Treasury regulations may also be made to enable the Inland Revenue to assess and recover any supplement which ought not to have been paid to an agent.

5. Subsection (4) defines the terms "agent", "employee", "employer" and "charity" for the purposes of the section.

6. Subsection (5) amends the existing rules for payroll deduction schemes by removing the maximum limit on donations and the exclusion of covenanted payments. It also extends the scheme to include donations made to the bodies in section 507 of the Taxes Act.

7. Subsection (6) provides that the supplement is payable in respect of deductions withheld from pay on or after 6 April 2000 and before 6 April 2003. It further provides that claims for the supplement by agents must be made before 6 April 2004.

8. Subsection (7) provides for the amendments to the existing legislation in subsection (5) above to take effect from 6 April 2000.

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9. Under an approved payroll deduction scheme an employee may authorise his employer to deduct charitable donations from his pay, before the calculation of Pay As You Earn tax.

10. The employer is required to pay the deductions to an agent approved for this purpose by the Inland Revenue. The agent distributes the donation to the charity or charities nominated by the employee or, where the agent itself has been nominated as the charity to receive the employee’s donation, retains the donation.

11. There is currently a maximum limit of £1200 a year on the amount which may be donated by an employee through the scheme.

12. The rules for the payroll deduction scheme currently exclude any donation made under a deed of covenant because it is eligible for a separate tax relief. That separate tax relief is removed from 6 April, so that it is no longer necessary to have this exclusion. (Donations under Gift Aid are excluded from relief under the payroll deduction scheme by a separate provision.)

13. The bodies in section 507 of the Taxes Act 1988 are the National Heritage Memorial Fund, the Historic Buildings and Monuments Commission, the British Museum, the Natural History Museum, the UK Eco-labelling Board and the National Endowment for Science, Technology and the Arts.

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