A Guide To Gift Aid

Collecting Gift Aid can be one of the most of the simplest ways to boost your donations. Claim tax relief on donations by UK taxpayers - at no extra cost to your or your donors!

What is Gift Aid?

Suppose you have a fundraising event at which you ask for donations. If you have asked those giving to make a Gift Aid declaration, then your charity can claim a tax repayment from HMRC - currently 25p for every £1 given by individual donors who are tax-payers.

Gift Aid was originally calculated from the current basic rate of income tax. At the moment, even though the income tax rate has gone down, the Gift Aid rate remains at 25%.

Maybe your charity doesn’t attract large donations but if you ask for Gift Aid donations wherever it is possible to do so (there are examples below), you may find that Gift Aid can be a very valuable source of income for your fundraising.

What is a charity for Gift Aid purposes?

How a charity is recognised for Gift Aid purposes depends on where your organisation is based within the United Kingdom.

  • In England and Wales, your organisation must be registered as a charity with the Charity Commission unless it is an exempt charity (such as the Church of England). Charities with an income of under £1000 per year are not required to register with the Charity Commission, and as such are also exempt. If you think your organisation is an exempted charity, then the HMRC will look at your constitution and decide whether your organisation has charitable status.
  • In Scotland, your organisation must be registered with the Office of the Scottish Charity Regulator (OSCR). If your organisation was already recognised as a Scottish Charity by the HMRC, it is automatically on the new register. If not, you need to apply to OSCR.
  • In Northern Ireland, HMRC will look at your organisation’s constitution and decide whether you can be accepted as “a charity for tax purposes”.

Who can make Gift Aid donations?

Gift Aid donations are not possible if the person making the donation does not pay tax or pays less tax (income tax and/or capital gains tax) than the tax that the charity would reclaim on their donation. This is explained on the Gift Aid declaration that donors have to complete.

Making the most of Gift Aid

Gift Aid can be used in many more situations than just asking for donations, including:

  • Sponsored walks and similar sponsored activities.
  • Membership subscriptions, provided the subscription is just about membership of the charity and doesn’t entitle the member to any services or facilities for their personal use (a separate charge can be made for services etc).
  • Unclaimed volunteer expenses. If you have volunteers (including trustees) who don’t want to claim expenses, ask them to do so and then to make a Gift Aid donation for the same amount. But you must actually pay the expenses over to the volunteer, rather than just do the transaction on paper.

You can also think about asking for Gift Aid donations instead of an admission charge to a charity event or purchasing an item at a charity auction. But you do have to make sure that you stay within the rules.

  • You can’t substitute Gift Aid donations for what are clearly payments for goods or services like goods purchased at jumble sales, or buying raffle tickets.
  • There are also strict limits on how much the donor or a member of their family or their business can benefit from the donation; such as by free admission to a charity concert or a social event. For donations of under £100, for example, the value of the benefit must not exceed 25% of the donation. In other words, if a ticket to a concert would normally cost £2.50 and somebody donates £20 by Gift Aid and gets free admission, the value of their free admission – the benefit – is under 25% of their donation, which is fine. But if that person had only donated £5, then the free admission would be worth 50% of their donation above the limit, and only the other 50% of their donation would qualify for Gift Aid.

Nevertheless with some fundraising events you could make all admission free, charge participants for refreshments etc, but also encourage them to make a donation as well. But this is only a good strategy to maximise Gift Aid if you can be confident that people will make additional donations!

Administering Gift Aid

There are three essentials to administering Gift Aid:

  • Getting donors to complete a Gift Aid Declaration - HM Revenue and Customs provide Gift Aid declaration forms - either a form for a single donation, or a form for a list of sponsors
  • Keeping records - You have to keep an exact record of Gift Aid donations so you know how much to claim from HMRC. You also have to record clearly every donor, what they donated and when, and keep their Gift Aid declaration forms which may be checked.
  • Making your claims - Gift aid can now be easily claimed online.