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Gift Aid is the Government's scheme for enabling churches and charities to reclaim tax paid on donations.
Tax paid on income, capital gains and savings all qualify and can be reclaimed on any donation from a UK taxpayer making a valid declaration.
Accurate record-keeping is essential for successful tax reclaims and should include donor details supported by a declaration, amounts and dates given. Always keep records even if you don't hold a declaration. You may be able to claim retrospectively.
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Gift Aid is a generous UK Government scheme enabling charities to reclaim tax paid on donations. Personal taxes such as income tax paid on earnings and savings or capital gains tax all qualify for Gift Aid. Other types of taxes such as VAT and council tax do not.
Charities in general under use Gift Aid, although some sectors are very well organised with it, particularly large charities and churches.
Research by the Institute of Fundraising a few years ago suggested that up to £740 million was left on the chancellor’s table annually by charities which could potentially have claimed.
Gift Aid is a straightforward scheme which is easy to administer once the basic principles have been grasped.
Gift Aid is repaid by the Government at basic rate, an effective rate of reclaim of 25%.
Only charities can claim Gift Aid.
Registration as a charity is often, but not always, required to demonstrate charitable status. More information on this is available in our guide to charitable status.
A variety of fund raising sources qualify for Gift Aid, although in all cases the funds must have been received from individual UK taxpayers making suitable declarations allowing the reclaim.
Common sources are as follows:
With anything other than a straightforward donation of money, it is important to read the rules on these measures to ensure compliance, particularly the section on HMRC’s website about providing benefits in return for donations: https://www.gov.uk/guidance/gift-aid-what-donations-charities-and-cascs-can-claim-on.
Gift Aid donors must:
HMRC explains about declarations and shows model examples on it's website: https://www.gov.uk/claim-gift-aid/gift-aid-declarations. We have also agreed a lighter version suitable for envelopes. This appears on all our Gift Aid envelopes.
HMRC allows charities to compose their own declarations. Below are the main points to bear in mind if you are contemplating this:
Full details of how to make a repayment claim appear via this link to HMRC's website: https://www.gov.uk/claim-gift-aid/how-to-claim.
Since April 2013, Gift Aid has been recoverable through HMRC's 'Charities Online' service via one of three options. The previous 'R68i' style of paper-based submission is also valid until 30 September 2013, but HMRC is encouraging all charities to move to one of the newer options.
Gift Aid declarations must:
Inaccurate claims will be returned unpaid.
For some years, HMRC has allowed aggregating of small donations up to £10 for ease of form filling. Charities can aggregate donations with a combined value up to £1,000 per line on a Charities Online submission. However, aggregated donations still need to be backed up with valid declarations from UK taxpayers. This initiative is not to be confused with the new Gift Aid Small Donations Scheme introduced in April 2013.
From 06 April 2013, most charities, unless very small, have been able to reclaim Gift Aid on donations up to £20. From the 2016/17 tax year the combined value of these donations can be up to £8,000 per year (previously up to £5,000). This is the equivalent of a free £2,000 each year. Full details about the scheme are available at: https://www.gov.uk/claim-gift-aid/small-donations-scheme.
Churches can enhance this by making use of 'Community Buildings' allowances, if there is more than one church in the PCC. As long as 10 people use the building, the allowance can be claimed for each building. More information: https://www.gov.uk/guidance/claiming-a-top-up-payment-on-small-charitable-donations#collections-in-community-buildings. A very helpful pdf download on making the most of GASDS is available via the Church of England's website, www.parishresources.org.uk.
This initiative is not to be confused with aggregation, dealt with above.
HMRC's new Charities Online service became available on 22 April 2013. This offers three options for making repayment claims including online submission. Full details are available via this link: https://www.gov.uk/guidance/claim-tax-back-on-donations-using-charities-online.
Gift Aid administration invariably comes with a need to know about various forms.
These can all be viewed via this link to HMRC’s website https://www.gov.uk/government/collections/charities-and-community-amateur-sports-clubs-forms.
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