Payroll Giving enables employees to donate to any UK charity by deduction from their wage or salary. Because the deductions are taken from gross pay before tax is calculated, the donation enjoys immediate tax relief at each employee's marginal rate of tax. For example, a £10 donation to a charity would cost £7.80 for a basic rate taxpayer or £6.00 for a higher rate taxpayer.

The Home Office has now launched the new grant scheme that will provide a cash incentive of up to £500 for employers with fewer than 500 employees and which set up a new Payroll Giving scheme. In addition, the Government will match the first £10 donated by each employee each month for up to six months, until the scheme ends in March 2007. The effect of the donation matching arrangement is that a charity will be able to receive £20 for a cost to the employer of £7.80 or £6.00, depending on the employee's marginal rate of tax.

In 2003/04, £91 million was raised for charities through Payroll Giving, although only 1% of UK companies currently offer the scheme. The Payroll Giving Grants programme is intended to encourage more companies to make Payroll Giving available to staff and thereby provide greater support for charitable organisations and the local community. Grants are payable to organisations that have fewer than 500 employees and that sign up to Payroll Giving before the end of 2006. The grants will be backdated to include those that have signed up since 6 April 2004.

The new Payroll Giving Grants programme is a government initiative that is funded by the Home Office and administered and promoted by the Institute of Fundraising and by Business in the Community.

Grants will be paid to organisations that sign up for the programme before 31 December 2006. Grants are tiered according to each organisation's size:

• £300, for employers with up to 199 employees,
  
  
• £400, for employers with between 200 and 249 employees, and
  
  
• £500, for employers with between 250 and 499 employees.

Full details of the scheme are available on a new website operated by the Institute of Fundraising, at http://www.payrollgivinggrants.org.uk. The site includes a toolkit for employers and tips on how to promote the scheme among employees. Employers wishing to obtain a grant should also register their interest on this website.

To set up a new scheme, the employer must first approach a payroll giving agency. These agencies are responsible for distributing the donations to the charities for which they are intended. The agencies generally make a small percentage charge for this service. In order to deduct donations under the net pay arrangement, i.e. pre-tax, a contract must be signed with the agency. There are also a number of professional fundraising agencies that can help employers launch a scheme and promote it among their employees. Information about payroll giving agencies and fundraising agencies is available on the website mentioned above and also on the Inland Revenue's website, at http://www.inlandrevenue.gov.uk/payrollgiving/employers/org.htm.

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Source:
www.gnn.gov.uk/content/detail.asp?ReleaseID=143253