In recent months we have been asked about Gift Aid, both by Charities and also by those who donate to Charities; so we thought it might be a good time to pull together a quick summary to help explain the position.
In this article we will look quickly at Gift Aid from the perspective of the charity.
What is Gift Aid?
Gift Aid is a method of allowing Charities to increase the value of gifts of money they receive from UK Taxpayers. Gift Aid can increase the value of a donation from £1.00 to £1.25.
How does it work?
In order to make a Gift Aid claim a charity or CASC (community amateur sports club) must be RECOGNISED by HMRC as a charity for tax purposes. A Gift Aid application can be made by any UK based charity.
Gift Aid claims can be applied to monetary gifts from UK tax payers. The donation must have been received from a UK taxpayer who must also provide the charity with a signed Gift Aid declaration. This declaration can be applied to a “one-off” donation, or the donor can elect to have the declaration applied to all donation made by them to the Charity from a particular point in time. This declaration can be back dated.
How to make a claim for Gift Aid?
Once your charity is recognised by HMRC you can then consider how and when to make an application to claim the Gift Aid on any applicable donations.
What counts as a donation for Gift Aid purposes?
Gift Aid can only be claimed on gifts of money from individuals, sole traders and partnerships. The donation must have been made in one of the following forms:
Cash
Cheque
DD (Direct Debit)
Credit/ debit card
Postal Order
Standing Order or telegraphic transfer
What does not count as a donation for Gift Aid purposes?
Donations from a limited company
Donations in the form of a loan waiver or debt conversion
Gifts made on behalf of someone else
Gifts with a condition about repayment
Gifts with a condition that the charity buys product or services from the donor
Payments received in return for goods or services
Where the donation is a “minimum donation” i.e. where the donor does not have any choice in the minimum value they can donate
Gifts made using Charity Vouchers or Charity Cheques
Donations received before HMRC recognises your organisation as a Charity for tax purposes
“Small” value donations don’t qualify for Gift Aid, do they?
This can depend on when the donation was made. Small donations, less than £20.00, made after 6 April 2013 can qualify for Gift Aid.
HMRC recently released a new scheme, The Gift Aid Small Donations Scheme, which… “allows eligible charities and CASC’s to claim top-up payments from HMRC on small cash donations that they receive.” For more information on this scheme see http://www.hmrc.gov.uk/charities/gasds/
In order for a Charity to apply a donation to this scheme it must meet the following criteria:
The donation should be less than £20.00 in value.
The donation can only be made by cash (cheques, DD’s, Standing Orders do not qualify)
The maximum amount of “small donations” that Gift Aid can be applied to in any one tax year is £5,000.
PLEASE NOTE – Any small donations received before 6 April 2013 however do not qualify.
How much is Gift Aid worth?
According to the Institute of Fundraising website they estimate that… “charities are currently missing out on approximately £740 million each year in Gift Aid income” (http://www.institute-of-fundraising.org.uk/guidance/tax-effective-giving/).
What next?
If you would like to find out more about Gift Aid please feel free to contact us. We will be issuing some further quick articles on Gift Aid within the next few days.