Gift Aid allows charities and CASCs to claim extra revenue from donorsIn 2015/16, HMRC reported that £1.26 billion was repaid to charities in Gift Aid, although £5.05 billion in Gift Aid was actually declared by individuals. This deficit means that billions of pounds in Gift Aid aren't being reclaimed by U.K. charities. Here's how to ensure you don't miss out on valuable extra revenue for your cause.
What is Gift Aid?
Gift Aid is a tax relief from the government that gives an additional 25p for every £1 an individual donates to a charity or community amateur sports club (CASC) in the U.K. In order to add Gift Aid to a donation, a donor must:
- Pay at least as much in income tax or capital gains tax in that tax year as they want to claim in Gift Aid
- Make a Gift Aid declaration to the charity
In some instances charities may still be able to claim on cash donations of £20 or less — such as from a collection — even if there's no Gift Aid declaration. This is called the Gift Aid Small Donations Scheme.
What can Gift Aid be claimed on?
Recognized charities and CASCs can claim Gift Aid on any donation made by an individual who has made a Gift Aid declaration and has paid at least as much income tax or capital gains tax as the amount he or she wants to claim in Gift Aid in that tax year.
To be recognized, your charity must be based in the U.K., EU, Iceland, Liechtenstein or Norway and be established for charitable purposes only and registered with the Charity Commission. Your charity also needs to be run by trustees and have up to two authorized people who manage your taxes. Lastly, your charity must be recognized by HMRC. (Registration can be done online.)
There are special rules for certain types of donations or fundraising. Below is just a summary — please visit GOV.UK for more detailed guidance:
- Funds from sponsored challenges (such as overseas treks or marathons). Sponsorship payments are eligible for Gift Aid if participants pay the cost of flights and accommodation themselves. The deposit or registration fee paid in advance of a sponsored challenge isn't eligible for Gift Aid.
- Charity membership fees. To qualify for Gift Aid, charity subscription payments must be for membership only — that is, they must not give members personal use of the charity's facilities or services. It's for this reason that CASCs can't claim Gift Aid on membership payments because members are given personal access to the club's facilities or services. Membership subscriptions paid to some professional organisations on HMRC's list of qualifying bodies, such as CharityComms, can be treated as an expense deduction. Working members can claim tax relief on their subscription, but subscriptions can't be treated as Gift Aid payments.
- Collections in places of worship. Money collected in a place of worship that will be passed directly to a charity isn't eligible for Gift Aid. This is because the money collected isn't part of the religious institution's own income.
- Selling goods on behalf of others (such as through a charity shop). Charity shops that operate a retail Gift Aid scheme to sell goods on behalf of donors may collect Gift Aid only if the donor has given permission for the charity shop to act as his or her "agent" in the sale. The shop owner must also agree to give the sale proceeds (minus any commission charged) to the charity as a Gift Aid donation.
- Charity events. If you sell tickets to an event you've organized (such as a concert), the payment doesn't qualify for Gift Aid. To be eligible, the payment must be a voluntary donation.
- Viewing charity properties (such as National Trust). Entry fees to visit a property owned by a charity don't qualify for Gift Aid because they're not a gift. However, a voluntary donation may qualify for Gift Aid.
- Charity auctions. If the retail value of an item bought in a charity auction exceeds the benefit limits, Gift Aid can't be claimed. However, you may be able to split between an amount to "buy" the item and an amount that can be treated as a gift in order to claim Gift Aid.
- Volunteer expenses donated back to your charity or CASC. If a volunteer decides to pay part or all of his or her expenses back to the charity, the payment is eligible for Gift Aid. However, this applies only when the volunteer makes an actual monetary payment to your charity or CASC. You can't claim Gift Aid if a volunteer decides not to claim for entitled expenses.
- Funds raised through charities involved in running schools. Only voluntary gifts or payments are eligible for Gift Aid. Donations given for nonuniform days, sponsored events, and building and equipment appeals usually qualify — while access to educational services or facilities that requires payment does not.
What can't Gift Aid be claimed on?
There are specific rules on types of donations that Gift Aid can't be claimed on. For example, GOV.UK lists the following as not eligible for Gift Aid:
- Donations from limited companies
- Donations made through payroll giving programs
- Payments for goods or services
- Payments that started as loans but no longer need to be repaid
- Donations in which the donor receives a "benefit" over a certain limit of shares, such as donations from charity cards or vouchers
- Membership fees paid to CASCs
- Donations received before your organization became a recognized charity or CASC
How are Gift Aid declarations made?
In order to claim Gift Aid, you must obtain a Gift Aid declaration from the donor. The declaration may be in hard copy or submitted online, stating that the donor:
- Agrees to Gift Aid being claimed on the donation
- Has paid the same amount or more in income tax or capital gains tax in that same tax year
The declaration form must include a description of the gift — for example, the donation amount — and include the name of the charity or CASC, the donor's name and the donor's home address. A record of declarations must be kept for six years after the most recent donation for which you claimed Gift Aid.
How is Gift Aid claimed?
Gift Aid may be claimed online through Charities Online with either a spreadsheet or your claims or with eligible software. If you're registered with online payment platforms, most will take care of any Gift Aid declared through their system and pay you directly. The caveat is for claims of more than 1,000 donations, which must be done with eligible software.
To claim by post, use form ChR1 — which you can get from the Charities Helpline.
What's the deadline to claim Gift Aid?
You can claim Gift Aid on a donation within four years of the end of the financial period in which you received the donation and you must keep a record of the donation for an additional two years.
Depending on how your charity is set up, this is:
- The tax year (6 April to 5 April) if you're a trust
- Your accounting period if your charity is a CASC, a Charity Incorporated Organisation (CIO) or a limited company
When should payment be expected?
If you claimed online, you'll receive a Gift Aid payment by BACS (bank transfer) within four weeks. If you claimed by post using the ChR1 form, you'll receive payment within five weeks.