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Carry back plan

20 October 2009
Issue: 4228 / Categories: Forum & Feedback
A client has a substantial chargeable event that is subject to tax in 2008/09. Can a gift aid payment be made in 2009/10 and backdated to mitigate the higher rate liability?

I have a client who has a chargeable event certificate in the sum of £98 000 but he held the investment bond for a period of 16 years. This results in £6 125 being added to his income for 2008/09.

Unfortunately he is right on the border of higher rate tax which means that the entire gain will be subject to 40% tax less the basic tax already deemed to be paid. This would give him a tax liability of £19 600.

An idea occurred to me that if he paid a gross sum under gift aid to a charity of his choice amounting to £6 125 in 2009/10 and set that back to 2008/09 he would completely wipe out the tax liability because his basic rate band would be increased by the necessary £6 125.

When I run this through my well-known software it still suggests...

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