Part 1: Donors
Chapter 5.1: Introduction
5.1.1 Since 6 April 2000 individuals and companies have been able to claim income or Corporation Tax relief on gifts to charity of certain shares, securities and other investments. The relief was extended from 6 April 2002 to include gifts of land or buildings. This relief is available in addition to the relief from Capital Gains Tax for gifts to charity from individuals and the relief from Corporation Tax on gains for gifts to charity by companies. Read more about capital gains reliefs for individuals in Helpsheet HS295.
5.1.2 An amendment to the 2004 Finance Bill was tabled on Friday 2 July 2004. The amendment’s intended to stop certain tax avoidance schemes that seek to exploit this relief. The schemes in question are highly contrived, using options and non-charitable trusts to obtain substantial tax relief at negligible cost, while giving little benefit to charity. Further details are available in the Inland Revenue News Release of 2 July 2004.
5.1.3 A further amendment was introduced by the Finance Act 2010, effective from 15 December 2009, to block avoidance schemes that exploit the rules for tax relief on gifts of qualifying investments to charities.
Chapter 5.2: When this tax relief applies
5.2.1 You can claim if you give, or sell at less than market value, any qualifying investments to a UK charity.
5.2.2 Because this tax relief has been targeted by marketed tax avoidance schemes, some anti-avoidance provisions have been introduced. A genuine donor who has qualifying investments that they want to donate to charity should have no concerns about these provisions. However where a donor has acquired a qualifying investment in the 4 years before their donation as part of a scheme or arrangement and:
- either the cost of acquisition of the investment is suppressed, for example, by the attachments of options to the investment
- the market value of the investment is artificially inflated at the date of gift to the charity
The relief will be restricted. There are more details on this in paragraph 5.9.3.
Chapter 5.3: Qualifying investments
5.3.1 The following categories of investment qualify for the relief:
- shares or securities which are listed on any recognised stock exchange - this includes London and Plus listed in the UK and any recognised overseas stock exchange
- shares and securities dealt in on any designated market in the UK - the only markets so designated currently are the Alternative Investment Market (AIM) of the London Stock Exchange and the PLUS - Quoted market of PLUS Markets.
- units in an Authorised Unit Trust (AUT)
- shares in a UK Open-Ended Investment Company (OEIC)
- holdings in certain foreign collective investment schemes - generally schemes set up outside the UK that are similar to AUTs and OEICs
- a qualifying interest in land
More information on recognised stock exchanges is shown at paragraph 5.20 below.
Chapter 5.4: Contact details
5.4.1 If you’re not sure whether an investment will qualify, you can contact HMRC Charities for advice
Chapter 5.5: Making a gift of shares or securities
5.5.1 You should first contact the charity you have selected to ensure that it can accept the proposed gift. If it agrees, you then need to sign a transfer form to take the shares out of your name and put them into the name of the charity. You can get a transfer form by contacting the registrars of the company. Their details will be on your share certificate and on your dividend vouchers. The registrars will be able to answer any questions about filling in the form.
5.5.2 Your chosen charity may also be able to help you with the transfer procedure.
Chapter 5.6: Making a gift of land or buildings
5.6.1 The gift can be made to any approved charity and you’ll need to contact the charity to ensure it can accept the proposed gift. Once the charity has confirmed it can accept the gift the property can be transferred to it.
5.6.2 To claim the relief you’ll need to obtain a certificate from the charity. The certificate must contain a:
- description of the qualifying interest in land which is the subject of the disposal the date of the disposal
- statement that the charity has acquired the qualifying interest in land
5.6.3 There’s no prescribed certificate for this purpose and the charity can determine the form its certificate takes.
Chapter 5.7: Giving a part share of a property to charity
5.7.1 You must give the whole of your beneficial interest in a property. In the situation where 2 or more persons hold the property, all of the joint owners must dispose of their interest in the property to the charity if any of them are to claim relief.
Chapter 5.8: Giving a house to a charity, but still living in it until you die
5.8.1 You wouldn’t be able to claim the relief under such an arrangement, as you wouldn’t have given away the whole of your beneficial interest in the property.
Chapter 5.9: Calculating the relief
5.9.1 An individual donor should deduct the relief when they calculate their income for the tax year in which they make the gift. A tax year runs from 6 April in one year to 5 April in the next.
5.9.2 Companies are allowed deductions from profits for the accounting period in which they make the gift. The maximum deduction is that which reduces the profits for the accounting period to nil.
5.9.3 For an outright gift, the amount you can deduct is:
- the value of the net benefit to the charity
- at the time you give or sell them the qualifying investment, plus
- any incidental costs (for example brokers fees or legal fees), less
- any money, or the value of other benefits you or a person connected with you (such as a relative or connected company), receive in consequence of you giving or selling the qualifying investment to charity
5.9.4 For a sale at undervalue, the amount you can deduct is:
- the amount by which the net benefit to the charity exceeds
- the actual sale proceeds, plus
- the amount by which the deemed proceeds for Capital Gains Tax purposes exceeds the actual consideration or, if this is nil, the incidental costs of disposal, less
- any money, or the value of other benefits you or a person connected with you (such as a relative or connected company), receive in consequence of you giving or selling the qualifying investment to charity
The value of the net benefit to the charity is the ‘relevant value’ of the qualifying investment less any related liabilities (see paragraph 5.9.6). The relevant value will normally be the market value of the qualifying investment however if the asset, or any asset from which the donated asset derives, was acquired by the person donating it, less than four years before the disposal:
- as part of a scheme or arrangement
- the purpose of the donor in entering into the scheme or arrangement was to obtain relief or an increased amount of relief
The relevant value is the lower of market value or acquisition value (see example 5).
5.9.5 The acquisition value for an asset which is donated in the same form as it was acquired is the cost to the donor, less any amount the donor, or a person connected with the donor, receives as part of the scheme they are involved with.
Where the qualifying asset donated is derived from a different asset that was acquired as part of a scheme, the acquisition value of the qualifying asset is a just and reasonable proportion of the cost to the donor of the original asset less any amount the donor, or a person connected with him, receives as part of the scheme they are involved with.
5.9.6 In addition, if the charity is, or becomes, subject to an obligation such that:
- it’s reasonable to suppose that the disposal of the qualifying investment would not have been made in the absence of the obligation
- the obligation is connected to the charity receiving the qualifying investment or a related investment the market value, or relevant value, of the qualifying investment is reduced by the aggregate value of the related liabilities of the charity resulting from the exercise of the obligation (example 4)
5.9.7 Some examples are given below:
Angela owns 5,000 shares in ABC plc, a company quoted on the London Stock Exchange. The shares are given to a charity when they are worth £10 each. A broker’s fee of £50 is charged for handling the transaction. As a token of gratitude the charity gives the donor tickets to an event worth £500.
The deduction that the donor can make is:
- the value of the shares - £50,000
- plus the broker’s fee - £50
- equals - £50,050
- less the value of the benefit received - £500
- totals - £49,550
John owns 1,000 shares in XYZ plc, a company quoted on the London Stock Exchange. The shares are valued at £4.50 each. He would like to give the shares to a charity, but needs to realise some money from them. So, he agrees to sell them to the charity for £2 each. As a token of gratitude the charity gives him a book worth £25.
The deduction that the John can make is:
- the value of the shares - £4,500
- less the amount the charity pays - £2,000
- equals - £2,500
- less the value of the benefit received - £25
- total - £2,475
George has owned a second property for some years and decides he will give it to a local charity he supports.
A qualified property agent values the property at £90,000 and he is charged £400 for the valuation and other legal fees. The charity is grateful and gives George a painting worth £1,000. The deduction that George can make is:
- the value of the property - £90,000
- plus the valuation and legal fees - £400
- equals - £90,400
- less the value of the benefit received - £1,000
- total - £89,400
Roger owns and gifts gilts with a market value of £10,000 to a charity and receives in return a free ticket to a concert worth £30. The charity’s under an obligation, for which it received a payment of £750, to sell any gilts it receives to a third party (not connected to Roger) at 10% of their market value. The charity sells the gilts to the third party for £1,000, so the net benefit to the charity from the receipt of the qualifying investment is £1,000.
|The deduction Roger can make is the market value of the gilt||£10,000|
|Less the market value of the charity’s liability under the obligation to sell the gilts at 10% of their market value (market value £10,000 less proceeds £1,000||£9,000|
|(the net benefit to the charity)||£1,000|
|Less the value of the benefit received||£30|
Mr Jones enters into an agreement with company X, which sells tax avoidance schemes, to buy £200,000 of shares in a FTSE 100 company from company X for £30,000. The shares come with an option attached for company X to buy them back after three years for £1.
2 days after purchasing the shares Mr Jones donates them to charity B and makes a claim for relief of £200,000. He claims that the fact that the option to buy back the shares exists isn’t taken into account in valuing the shares because the option is a contingent liability which is ignored.
Because the shares were acquired as part of a scheme or arrangement less than 4 years before they were gifted to charity B and the reason Mr Jones purchased them was so that he could donate them to charity and claim the relief, his relief is restricted to the lower of market value or acquisition cost. Therefore, Mr Jones is only entitled to relief of £30,000.
Chapter 5.10: Claiming the relief
5.10.1 You can claim relief by:
- completing the appropriate section of your tax return
- requesting that your PAYE code is amended for the current tax year
- requesting that your self assessment payments on account are reduced
5.10.2 If you’re not sent a tax return at the end of the tax year, or if you want to claim relief before the end of the current tax year, you should write to your tax office, giving full details of the gift, in order to claim the relief.
5.10.3 Companies should include the amount of relief they are claiming in the ‘Charges Paid’ box on their CTSA Return.
Chapter 5.11: Evidence you will need of the gift
5.11.1 You’ll need some evidence of the transfer of ownership of the qualifying investments. In the case of a gift of property, you’ll need to obtain from the charity the sort of certificate mentioned above. For a gift of shares, evidence will take the form of a dated copy of the transfer form or some other dated document irrevocably giving the qualifying investments to the charity.
5.11.2 This is important because the shares will come out of your name on the company’s register at a later date, by which time the value of the shares may have changed. You may also continue to receive communications, including dividends, from the company until the transfer has been registered.
Chapter 5.12: The date to use as the date of gift for the purposes of establishing the market value of the qualifying investments
5.12.1 The date on which the qualifying investments are transferred to the charity. In the case of shares and securities, this is likely to be the date that you sign and hand over the stock transfer document. For gifts of land you should take the date on which you disposed of your beneficial interest in the land. Normally this will be the date on which you conveyed the property to the charity. However, if the disposal was made under a contract, perhaps a sale at below market value, you should take the date on which the contract was made. If the contract was conditional take the date on which the conditions were all satisfied. If the gift was made by a declaration of trust you should take that date. If you have granted a lease to a charity you should take the date you granted the lease.
Chapter 5.13: Establishing the market value of the qualifying investments
5.13.1 ‘Market value’ means the price that the investments might reasonably be expected to sell for in the open market.
5.13.2 There are different rules for establishing the market value of shares and securities. Some basic rules are explained at paragraph 5.21 below.
5.13.3 For gifts of real property, you need to determine the market value of the property on the date you wish to gift the property to charity. Generally you’ll need to obtain professional advice as to the market value. The incidental costs of this advice may be added to the market value if they relate to the valuation of the property for that particular gift.
Chapter 5.14: Obtaining confirmation of the value of a gift before claiming relief
5.14.1 If you’ve made a gift of land to charity you may want to obtain confirmation from HMRC that they agree the value of your gift before you claim relief in your self assessment or CTSA Return. As long as you have a valuation of the land at the time you made the gift HMC can check that valuation for you.
5.14.2 This service is only available for checking your valuation. They are not able to provide valuations of your property. HMRC can only check your valuation after you have made a gift, not before.
Chapter 5.15: Charity asks for the shares or securities to be sold on its behalf
5.15.1 If you contact the charity about making a gift of shares and securities and the charity asks you to sell them on its behalf, you can do so. However, you’ll need satisfactory evidence (such as an exchange of letters) to show that you’ve made the gift of the investment to the charity and that the charity asked you to dispose of the investments on its behalf. Otherwise, you may be treated as having made a disposal on your own account and the cash you give to the charity may be treated as a Gift Aid donation. This may also incur a Capital Gains Tax charge.
5.15.2 Once the company registrar has received the stock transfer form and ownership has been transferred, you can no longer dispose of the shares for the charity.
Chapter 5.16: Relief from Capital Gains Tax
5.16.1 The amount of Capital Gains Tax or Corporation Tax that you would have paid if you sold the shares or property, rather than given them to a charity will depend on a number of factors. Please see our Introduction to Capital Gains Tax for further details.
Chapter 5.17: Donating the qualifying investments or selling them and giving the proceeds to charity using Gift Aid
5.17.1 For companies, relief for cash gifts is given in the same way as relief for gifts of qualifying investments and in most cases the relief will be the same whichever method of donating you choose.
5.17.2 If you’re an individual, it depends on your circumstances and whether you wish the charity or yourself to gain the greater benefit from the tax relief. A charity can claim Gift Aid on a qualifying gift of money but can’t make any claims in respect of the gift of an asset.
5.17.3 Generally, giving the shares to charity will be simpler, both in terms of the paperwork on the disposal and in completing your tax return, than selling the shares yourself and giving the cash to the charity.
Chapter 5.18: If you only have a small number of shares, which a charity might not think worthwhile
5.18.1 You can give your shares to ShareGift, a registered charity (registered charity number 10526868). Their charity share donations scheme accepts gifts of small numbers of shares, aggregates them and then donates the sale proceeds to a number of registered charities. ShareGift can also accept larger donations of shares to specific charities.
5.18.2 For further information, please visit the ShareGift website.
Chapter 5.19: Further information
5.19.1 Outright gifts and bequests to charity are completely free of Inheritance Tax.
Capital Gains Tax
5.19.2 You’re not liable to Capital Gains Tax or Corporation Tax on capital gains when you make a gift of assets, such as land or stocks and shares, to charity. Read more about relief for gifts and similar transactions in Helpsheet HS295.
Stamp Duty exemption
5.19.3 Charities don’t need to pay Stamp Duty on acquisitions of land or buildings. Further information contact Stamp Duty Land Tax Helpline.
Chapter 5.20: Recognised Stock Exchanges
5.20.1 The definition of a ‘Recognised Stock Exchange’ (RSE) is given in Section 1005 Income Tax Act (ITA) 2007. It includes the London Stock Exchange and the Plus Listed Market in the UK and any Stock Exchange outside the UK designated as an RSE by an order made by the Commissioner of HMRC.
5.20.2 Recognition under Section 1005 ITA 2007 is for tax purposes only and does not imply recognition or approval for regulatory or other purposes.
5.20.3 Read more about Recognised Stock Exchanges.
Chapter 5.21: How to value different kinds of qualifying investment
5.21.1 Shares or securities quoted in the London Stock Exchange Daily Official List.
You should use either the:
- lower of the 2 quotations on the day in question plus 1 quarter of the difference between those 2 amounts
- mid point between the highest and lowest prices on which bargains were done on the day, except for bargains at special prices whichever is the lower
5.21.2 Bargains at special prices are clearly shown in the Daily Official List. They shouldn’t be included in the comparison of highest and lowest prices. Bargains at special prices are now very rare.
5.21.3 For other shares or securities listed or dealt in on a recognised stock exchange, there’s no special formula for valuing these. Their market value is ‘the price which those assets might reasonably be expected to fetch on a sale in the open market’.
5.21.4 Where shares are quoted on an overseas stock exchange it will normally be acceptable to take the value as the price quoted on that exchange for the day of the gift, translated into sterling at the rate of exchange for that day.
5.21.5 Prices for these shares and securities and those quoted in the London Stock Exchange Daily Official List are often published in the financial pages of newspapers. The newspaper valuations may be used where the parcel of shares is modest.
Units in UK Authorised Unit Trusts (AUT)
5.21.6 You should use the ‘selling price’ (also called the ‘bid price’ - the price at which units are sold by investors) published by the unit trust manager for the day in question. The ‘selling price’ is usually given in the financial pages of newspapers under ‘authorised investment funds’. If no price was published for the day in question you should use the last price published before that day.
Shares in UK Open Ended Investment Companies (OEIC)
5.21.7 You should use the published price for the day in question. This can usually be found in the financial pages of newspapers under ‘authorised investment funds’. If no price was published for the day in question you should use the last price published before that day.
Holdings in foreign collective investment schemes
5.21.8 You should use the published price for the day in question. This can usually be found in the financial pages of newspapers under ‘offshore or overseas funds’. If no price was published for the day in question you should use the last price published before that day or contact the fund manager.
Chapter 5.22: A qualifying interest in land
5.22.1 A qualifying interest in land means a:
- freehold interest in land in the UK
- leasehold interest in land which is a term of years absolute, where the land in question is in the UK
5.22.2 An agreement to acquire a freehold interest and an agreement for a lease aren’t qualifying interests in land.
5.22.3 In Scotland, references to ‘a freehold interest in land’ mean the interest of the owner, and references to ‘a leasehold interest in land, which is for a term of years absolute’ mean a tenant’s right over or interest in property subject to a lease.
5.22.4 To qualify for this relief you must dispose of the whole of your beneficial interest in the land in question to the charity.
5.22.5 If you grant a lease to a charity either rent-free or below market rent you will not have disposed of the whole of your beneficial interest in the property if you retain the freehold reversion or a head-lease. However, if you grant such a lease you will be treated, for the purposes of this relief, as having disposed of the whole of your beneficial interest.
5.22.6 A person may dispose of the whole of their beneficial interest in land together with any easement, servitude, right or privilege, so far as they benefit that land. For the purposes of this relief, the disposal of the easement etc is treated as the disposal by that person of the whole of his beneficial interest in a qualifying interest in land.
5.22.7 If you own a qualifying interest in land jointly, or in common, with 1 or more other people, relief will only be due if all of you dispose of the whole of your beneficial interest in that land to the charity. If you give property to charity in this way the relief to be allowed to each of you should be agreed upon by all of you.
5.22.8 There are special rules to prevent this relief being used for tax avoidance purposes. In certain circumstances all entitlement to relief can be withdrawn and any tax due can be recovered by assessment. In broad terms, the circumstances in which this will be done are where, within a specified period, you, or a person (including a company) connected with you, becomes entitled to any interest or right in relation to all or part of the land. This doesn’t apply if that person acquires that interest or right for full consideration or as a result of a disposition of property on death.
5.22.9 The specified period is:
- for individuals, the fifth anniversary of the normal self assessment filing date for the tax year in which the disposal was made
- for companies, the sixth anniversary of the end of the accounting period in which the disposal was made
Part 2: Charities
Chapter 5.23: Introduction and advice
5.23.1 This relief is intended to act as an incentive for donors to gift these investments to charity. Such gifts don’t fall within the Gift Aid Scheme, as they don’t take the form of payments of a sum of money. No tax is deducted from the gift so charities don’t need to reclaim any tax from HMRC in connection with the gift.
5.23.2 Since this relief was introduced it has been the subject of a number of marketed tax avoidance schemes. These schemes focus on obtaining increased relief for the donor and there’s rarely any substantial value passed to the charity. If your charity receives a gift of shares or securities where there is a discrepancy between the apparent value and the amount that the charity is able to realise you should tell HMRC so that action can be taken to protect this relief for genuine donors.
5.23.3 Sometimes a scheme provider may approach a single charity to act as the recipient for all the ‘gifts’ in their tax avoidance scheme. The charity may receive a fee for this but won’t benefit from the full value of the investments which usually just pass through the charity. The amount of the fee may be very tempting but if an offer looks too good to be true then it probably is. Acting as a conduit in this way may also amount to non primary purpose trading and any profits would be taxable. If you’re asked to take part in such a scheme we would like you to tell us.
Chapter 5.24: What the recipient charity can do with the gift
5.24.1 That is entirely for the charity to decide. The investments can be sold immediately, or at a later date, and the proceeds used for charitable purposes or they can be retained by the charity as an investment.
5.24.2 If the charity decides to retain a gifted investment of shares or securities, it will probably receive dividend income. Charities can’t claim repayment of the tax credit attaching to dividends they receive.
5.24.3 Any gift of investments to a charity is not an investment by the charity. So the charity won’t be treated as having made an investment that is not a ‘qualifying investment’ for the purposes of Sections 558 and 559 Income Tax Act (ITA) 2007 or Sections 511 and 512 Corporation Tax Act (CTA) 2010 where the cost of non-qualifying investments is treated as ‘non-charitable expenditure’ and can give rise to a tax charge. A sale of investments to a charity at undervalue does, strictly, involve the charity in making an investment. Where those investments are not ‘qualifying investments’ for the purposes of Sections 558/559 ITA or Sections 511/512 CTA, HMRC would be unlikely to treat their cost as ‘non-qualifying expenditure’ if they were acquired for significantly less than they were worth and no tax avoidance was involved.
Chapter 5.25: How the charity realises the value of the gift
5.25.1 Once the shares have been transferred into the charity’s name, the shares may be sold through a stockbroker or bank. The charity may already have an existing relationship with a stockbroker or an investment manager who can help them. If not, names of stockbrokers can be obtained from the London Stock Exchange or the Association of Private Client Investment Managers (APCIM).
5.25.2 There will be a commission charge for selling shares.
5.25.3 The proceeds of such a sale cannot come within Gift Aid.
5.25.4 Some charities may ask donors to sell the investments on their behalf. There must be satisfactory evidence of the investments having been given to the charity and the charity asking the donor to sell them on the charity’s behalf. This won’t affect entitlement to the relief. The evidence is important because otherwise we might treat the gift as a Gift Aid donation of the cash realised. The donor may also incur a Capital Gains Tax charge and will not receive relief for the full value of the gift.
Chapter 5.26: How a potential donor finds out about the relief
5.26.1 All the necessary information is contained in Parts 1 and 2.
Chapter 5.27: The amount of relief and date of the gift
5.27.1 Where qualifying investments are given to a charity the amount of the relief that can be claimed by the donor is called the ‘relievable amount’. Details of how a donor should calculate the relievable amount is at paragraph 5.9.3.
5.27.2 The date on which the gift is made is the day on which the whole of the beneficial ownership of the investments is transferred to the charity. This is usually the date on which the donor:
- signs the stock transfer document
- in the case of electronic lodgment under the Crest system, gives written instruction for his broker to irrevocably transfer the investment
- where the charity asks the donor to sell an investment (see paragraph 5.35), gives written intention of irrevocable transfer to the charity
This is important because the shares will come out of the donor’s name on the company’s register at a later date and the value of the shares may have changed in the meantime. The donor may also continue to receive communications, including dividends, from the company until the transfer has been registered.
5.27.3 It would be good practice for the charity to keep records of the date of transfer so that they can help the donor, if necessary.
5.27.4 The amount of any incidental costs of making the gift - for example any broker’s fees can also be claimed.
5.27.5 Any amount of consideration or the value of any benefits received by the donor, or persons connected with them, in connection with the gift must be deducted from the amount of relief.
5.27.6 Where a qualifying investment is sold to a charity at below market value the amount of the relief for the donor will be broadly based on the relevant value less the consideration they receive for the sale. There are more details at paragraph 5.9.4.
Chapter 5.28: The charity’s Capital Gains Tax position
5.28.1 Normally, when an individual or company gives away assets, including land, buildings, shares and securities, or sells them for less than their market value they are charged to tax as if they had sold the assets for their market value. The person acquiring the assets is treated as having acquired them for their market value.
5.28.2 Where assets are sold to a charity for more than they cost, but for less than their market value the charge to tax on any gain is based on the actual disposal proceeds.
The charity acquiring the assets is treated as having acquired them for the amount they actually paid.
5.28. 3 Where assets are given to a charity, or sold to a charity for no more than they cost the donor to acquire the donor is treated as having disposed of the assets for such an amount as gives rise to neither a gain nor a loss.
The charity acquiring the assets is treated as having acquired them for the same amount and at the same time as the donor’s disposal proceeds less any relief claimed by the donor under the gifts of qualifying investments provisions. This means that the charity’s acquisition cost is reduced which will lead to a larger chargeable gain on disposal of the assets. If the gain is applied for charitable purposes it will be exempt from tax.
The following examples illustrate this:
A donor has 1000 shares in EFG plc, a company listed on the London Stock Exchange. The shares cost £2 each and are valued at £4.50 each. The donor sells the shares, at under-value, to a charity for £2 each. Indexation and taper relief are ignored in this example.
The donor is treated as having disposed of the shares for £2 each so neither a gain nor a loss arises. The relievable amount is:
- the value of the shares - £4,500
- less the amount the charity pays - £2,000
- relievable amount for the donor = £2,500
The cost to the charity for the purposes of any subsequent disposal will be:
- the donor’s original acquisition cost - £2,000
- less the relievable amount’ £2,500
Because the relievable amount exceeds the original cost to the donor, the cost for any subsequent disposal by the charity is treated as nil.
A donor has 100 shares in FC plc, a company listed on the Alternative Investment Market. The shares cost £2 each and are valued at £3 each. The donor sells the shares, at undervalue, to a charity for £2 each. Indexation and taper relief are ignored in this example.
The disposal proceeds do not exceed cost so the donor is treated as disposing of the shares for £2 each and so neither a gain nor a loss arises. The relievable amount is:
- the value of the shares - £300
- less the amount the charity pays - £200
- relievable amount for the donor = £100
The cost to the charity, for the purposes of any subsequent disposal, will be:
- the donor’s original acquisition cost - £200
- less the relievable amount - £100
- acquisition cost for the charity = £100
Chapter 5.29: Valuation of investments
5.29.1 Donors need to know the market value of their investments at the date of disposal so that they can calculate the amount of relief due. Charities need to know the market value at that date so that they can calculate the ‘relievable amount’ and so establish their own base cost for the investments.
5.29.2 The values of most qualifying investments can be found in the financial pages of newspapers such as the Financial Times. It’s advisable for donors to establish the market value of the investment at the time it’s given to the charity. Finding it out later may involve time-consuming research.