Man carrying a large gift on his back

Carry on

Douglas Collier explores the utility of carry-back claims when filing tax returns in the UK

A good reason not to file a UK tax return before the 31 January deadline, which is disregarded by His Majesty’s Revenue and Customs (HMRC) in its push to encourage taxpayer compliance, is the rule relating to the carry-back of gifts to charities to the preceding tax year.

Section 426(6) of the Income Tax Act 2007 (the Act) enables an election to be made by a taxpayer that treats a qualifying gift made to a charity to be included in the computation of the previous year’s tax liability, provided that the gift has been made before the earlier of either:

  • the filing of the taxpayer’s self-assessment return; or
  • 31 January.

In practice, a carry-back claim requires the taxpayer to make payments to charity that are of sufficient magnitude to warrant the additional record keeping and time spent making the claim. Further, unless the taxpayer is merely seeking to accelerate the tax relief due to their generosity, a claim is effective only when the marginal rate of income and capital gains tax (CGT) in the preceding year is higher than the following year. The difficulty for the taxpayer or tax advisor is predicting the effective rate of tax before the tax year has ended.  

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