A Free Gift from The Taxman

When donating to charitable causes all charity’s will generally ask the giver to “gift-aid” their donation. Paul Burton expresses astonishment at how few of his own charity clients take advantage of the scheme.

It never ceases to amaze me that when we first meet a new charity client, how many are not making Gift Aid claims.

Why wouldn’t you? It’s free money and a no-brainer!

Charity trustees should always seek to maximise income for their charity, but we are often given excuses that it’s ‘too difficult to make a claim’, it’s ‘not worth it’ or there is ‘not much money involved’.

Here’s a reminder. For every £100 donation from an individual that a charity receives which can be gift-aided by the giver, the charity can reclaim back £25 from HMRC (while the basic rate of tax is 20%).  Just think. £2,000 in gift-aided donations yields £500 tax back. Surely that’s easier than organising a coffee morning or table top-sale?

So, what’s involved with making a Gift Aid Claim?

Gift Aid Declarations: To claim Gift Aid, every donation must be supported by a declaration.  There’s no need to reinvent the wheel here, as model declarations and guidance are readily available from HMRC’s website or from charity support websites. If you are a church charity, for instance, then the Parish Resources website is a great help.

Gift Aid Claims: Before your charity can claim Gift Aid, you must register with HMRC by completing and submitting the online application CHA1. If it’s a requirement that you are registered with a charity regulator (such as the Charity Commission or OSCR), you must have done so before registering with HMRC.

There are three ways to claim Gift Aid:

  • Online claims through the Charities Online Service;
  • Use of compliant donor management software; and
  • Paper Claims (it’s still possible to claim using paper forms contrary to popular belief).

As you would expect, there are some time limits to consider and rules regarding certain types of donations where the donor might receive some benefit, but these are not too onerous and they don’t apply to most straightforward monetary gifts.

Record Keeping: Charities must maintain auditable records of declarations and of receipt of donations on which Gift Aid has been claimed. Most charity’s accounting systems should be able to provide the audit trail required

Oh, and there are more freebies to be had under the Gift Aid Small Donations Scheme or GASDS for short.

A charity can claim a Gift Aid-like top-up payment on small cash donations (notes, coins and contactless card payments) of £20 or less, a figure which will rise to £30 at the start of the 2019-2020 tax year. There is no requirement to obtain and store Gift Aid declarations. The scheme does not extend, however, to card payments, cheques and bank transfers. The top-up is calculated in the same way as Gift Aid. This means, with basic rate tax at 20%, the top-up payment is worth 25% of the value of the donation. The total value of donations eligible for the top up payment is capped at £8,000.

There we have it. Gift Aid is not too difficult, is it?  So speak to your accountant about it and get claiming!