Gift Aid is one of the most crucial tools for charitable and religious organisations to incorporate into their donation scheme. In this guide, we will be explaining the ins-and-out of Gift Aid and how your church and charity can benefit from the scheme to ensure you receive the maximum financial benefit from your donations.
What is Gift Aid?
Gift Aid is a tax relief for individuals that enables them to give the income tax or capital gains tax that they pay directly to a charity on top of their donation. In effect it adds 25p for every £1 donated to a charity. This is an incredibly valuable tax relief, and claiming is straight forward. Every small charity that regularly receives donations from individuals should register for Gift Aid so that they maximise the value of donations to their charity.
How does Gift Aid work?
Individuals need to give their consent for the charity to receive their tax on top of their donation. They do this through making a Gift Aid Declaration. A valid Gift Aid Declaration must include:
• The name of your charity
• The individual’s name
• The individual’s home address including house number/name and postcode
It must also be clear that the individual has chosen to Gift Aid. This could be through filling out their name and address, ticking a box or signing the Declaration. Otherwise, you have no way of proving that the individual wanted your charity to claim Gift Aid.
This is a statement which the individual (usually a form) fills in to say that they give permission for the charity to claim the tax. As only income tax and capital gains tax can be claimed, individuals must be confident that they are paying enough tax to cover the amount that they wish to donate to the charity. This tax must be paid in the same tax year that the donation is made (tax year runs from 1st April till the 31st March). You claim Gift Aid on donations made up to four years ago (providing that they paid enough tax in that year) and you can get people to sign a declaration that enables you to Gift Aid all future donations, so that you don’t need to ask them again if they regularly give to you.
What types of donations can you claim on?
There are some rules about the types of donations can have Gift Aid claimed on them.
1. The donation must be from the donor’s own money. For example, a husband cannot claim Gift Aid on a donation made by their wife.
2. The donation must be money. Gifts in kind don’t count. Cash, cheques, direct debit, credit card, debit card, postal order or standing order all count – as do electronic transfers. Old chairs, books or gifts of time don’t count!
3. Payments for a service or goods don’t count. For example, paying for items in a jumble sale doesn’t count.
How do I register for Gift Aid?
To register for Gift Aid you must be:
1. Based in the UK, EU, Iceland, Liechtenstein or Norway
2. Established for charitable purposes only (i.e. you aim to deliver benefits for the public, rather than private individuals). See this list for more information.
3. Registered with the Charity Commission.
4. You must not be run by people who have been individual in fraud, abused the tax system, used tax avoidance schemes using charity reliefs, been involved in designing or promoting a tax avoidance scheme or been barred from being charity trustees or disqualified from acting as a company director.
If you meet these criteria, you can register online with HMRC’s online service.
What do I need to have with me to register?
You’ll need to have with you:
• The charity’s bank account details and financial accounts
• The details of 2 people (trustees, volunteers or staff) that are going to claim Gift Aid on behalf of your charity. This includes their addresses, dates of birth and National Insurance numbers.
• Your charity’s registration number with the Charity Commission.
• Your charity’s governing document and objectives (also known as charitable purposes).
What else do I need to know?
• You need to keep your details up to date – both of your charity and the people that are claiming Gift Aid.
• You need to keep hold of the Gift Aid Declaration and details of donations that are claimed by the charity for 6 years after the most recent donation you claimed Gift Aid on – so keep those records safe and somewhere you can easily access them!
• If you are in doubt about anything to do with Gift Aid, contact the HMRC Charities Outreach Team on 0300 123 1073.