Payments to a charity under Deed of Covenant
How it works
This is a scheme where the donor signs a deed of covenant under which they promise to pay to a charity a sum net of Jersey income tax for a period of at least five years.
The charity in turn reclaims, upon presentation of the appropriate certificate, the tax deducted from the payments it receives.
For example, a donor covenants £500 annually for five years. They will pay to the charity this annual sum. The charity will then claim from Revenue Jersey, an additional £125 each year over the period of the covenant.
Donors who don't pay Jersey tax
Revenue Jersey will seek to recover from the donor the tax deducted under the covenant.
In the example above if the donor paying the £500 is tax exempt, they will receive a tax bill of £125 for each year that they are exempt from tax (being the amount of tax deducted). So overall they will pay out £625 each year.
The charity, however, still has the right to their reclaim of £125.
In this case it would probably be better for the donor to just give the amount that they want the charity to receive and not use the deed of covenant scheme.
The information required on a deed of covenant
The original deed of covenant should include the:
- date of the deed of covenant
- name and address of the donor making the deed of covenant
- tax identification number (TIN) of the donor
- total annual amount to be given to charity, with the wording ‘after deduction of income tax at the standard rate’
- period of the covenant (this must be for a minimum of five years)
- date the first payment is to be made.
The deed of covenant should then be signed by the person making the covenant and independently witnessed.
Sample deed of covenant
Deed of covenant tax repayment information for charities