During the COVID-19 pandemic, many people are choosing to give up
part of their income to support their business or employers, or
donate to charity.
HMRC is keen to
support people who choose to waive - or give up – part of their
income, particularly when it comes to understanding any tax
implications.
Employers, directors and employees have several options to
support a business or employer, including:
- waiving their salary or bonuses before they’re paid
- waiving the right to any dividends
- giving salary or dividends back to their employer after
they’ve been paid
To donate to charity, people can use:
Supporting a business or an employer
Waiving salary or bonuses before they are paid
A ‘waiver of remuneration’ happens when an employee gives up
rights to remuneration and gets nothing in return.
If an employee and employer agree to a reduction in the
employee’s remuneration before they are paid, for example to
support company cashflow during the pandemic, then no Income Tax
or National Insurance contributions (NICs) will be due on
the amount given up.
This is provided the agreement is not part of any wider
arrangement to divert the amount to a particular recipient or a
cause. For example, if it was waived on condition that the sum
would be donated to a particular charity, this would still be
liable to tax.
Waiving dividends
Directors or other shareholders, including employees, are able to
waive their right to be paid a dividend.
For this to be effective, a Deed of Waiver must be formally
executed, dated and signed by shareholders and witnessed and
returned to the company.
The waiver must be in place before the right to receive a
dividend arises. For final dividends, this is before they are
formally declared and approved by the shareholders. For interim
dividends, the waiver must be in place before the dividends are
paid.
Giving salary or bonuses back to your business or employer after
they have been paid
It is possible to give back salary or bonuses to a business or
employer after they have been paid.
However, it is not possible to claim back the Income Tax
and NICs that would
already have been deducted from the salary or bonuses on payment.
Bonuses must be waived before the date they are due to be paid.
If they are waived on or after the due date then tax will still
be payable on them, even if the bonus is not paid over.
Donating to charity
Payroll Giving
Payroll Giving is a way of giving money to charity without paying
tax on it. It must be paid through PAYE from someone’s wages or
pension.
If you’re an employee, you should select a registered charity to
donate to, and let your employer’s payroll department know.
Employers should contact a Payroll Giving agency to set up a
scheme. The donation will be taken from employees’ pay before
Income Tax but after National Insurance. Any registered charity
in the UK or the EU recognised by HMRC for tax purposes can
receive donations through Payroll Giving.
Gift Aid
Donating through Gift Aid means charities and community amateur
sports clubs can claim an extra 25p for every £1 donated.
This means that if you make a donation to an eligible charity,
the charity can claim back from HMRC the basic rate tax you
would have paid on the amount. This is a way of giving to charity
tax efficiently even after you have been paid.
Further help
HMRC has
a dedicated
helpline available to support any of our customers
affected by coronavirus (COVID-19).
