Is your charity missing out on valuable Gift Aid?


How much do you know about Gift Aid? Are you confident that your organisation is maximising its benefits or are you unsure about how Gift Aid works? Here, we give an overview of the scheme as a handy starting point:

What is Gift Aid?

The HMRC defines Gift Aid as “a way for charities or Community Amateur Sports Clubs (CASCs) to increase the value of monetary gifts from UK taxpayers by claiming back the basic rate tax paid by the donor on the donation. It can increase the value of donations by a quarter at no extra cost to the donor. Gift Aid is worth nearly £1 billion a year to charities and their donors”.

In other words, Gift Aid is currently worth 25p for every pound that is donated. However, according to the Institute of Fundraising, charities in the UK are missing out on over £740 million in Gift Aid every year, often because they don’t understand how the scheme works.

How can people make a Gift Aid donation?

Every donor has to complete a Gift Aid declaration to say that they give permission for your charity to claim tax back on their donations. This declaration can be made orally or in writing and can ask for you to receive backdated Gift Aid for all donations the person has made to your charity over the past four years. The declaration also covers any future donations.

Are all donations eligible?

Gift Aid only applies to the basic rate of tax (20%). Donors who pay a higher rate of income tax can reclaim the difference between the basic tax rate and the highest rate they have paid after making a donation to your charity via their tax return. They can keep this or donate it back to the charity of their choice.

For a donation to be eligible for Gift Aid, the donor must be a UK taxpayer and have paid an amount of Income Tax and/or Capital Gains Tax during the current tax year that equals or exceeds the amount of tax that all the charities and CASCs that the donor has given to will claim back.

Claiming Gift Aid

To start claiming Gift Aid on donations from people who have completed a Gift Aid declaration, you simply need to register your organisation with HMRC for tax purposes.

The importance of proper record keeping

If you accept Gift Aid payments, you are required to keep declarations and records of all transactions relating to Gift Aid on file for a minimum period of six years. The records should show a clear link between the donor, their declaration and donation. You can keep paper or electronic versions of these records, including a voice recording of an oral declaration.

If the HMRC does audit your organisation in reference to Gift Aid, it will expect to see your blank declaration forms, fundraising literature, declarations and sponsorship records, and your account records, including bank statements, paying in books, receipts and envelopes.

Claim your Gift Aid online

On 22nd April 2013, it became possible for charities and CASCs to sign up via the Charities Online service to make Gift Aid repayment claims electronically. This new development will make it much simpler and faster to make a claim using an online form; you can also claim through your own database or using a paper form.

A valuable addition to your income

Ultimately, Gift Aid offers a way of maximising the value of donations made to your organisation. It is quick and simple to set up and, once the right processes and systems are in place, it can provide an extra stream of income.

What are your experiences of Gift Aid? Does it make a difference to your charity? We’d love to hear your thoughts.

Still not sure what to do about Gift Aid or whether your records are up to scratch? Speak to SDW Accounting and we’ll be happy to advise you.

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