Charitable Status- frequently asked questions

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What are the tax advantages to charitable status?

Generally most charities are exempt from income tax, corporation tax and capital gains tax. Apart from the income tax associated with donations under the Gift Aid scheme, income tax deducted from certain other types of income attract repayment, for example bank interest, government stocks, royalties and Estate income.

The tax system also encourages individuals and companies to give charities certain shares and securities.

We are registered with the Charity Commission; do we need to register with you?

Yes, if you wish to claim repayment of tax we need to set up a record in HMRC Charities so that we can process repayments. In certain circumstances a charity may need to notify HMRC Charities of its existence because it is unsure of the tax treatment of a particular source of income.

Is there a Scottish or Northern Ireland equivalent of the Charity Commission?

The Charity Commission only registers and regulates with charities established in England and Wales. The Office of the Scottish Charity Regulator (OSCR) registers and regulates charities established in Scotland. HMRC Charities considers if bodies established in Northern Ireland are entitled to tax exemptions as charities. Further information for charities based in Northern Ireland is contained in our guidance notes.

What is the current basic rate of tax?

From 6 April 2000 to date it is 22%.

How much do we get back?

This will depend upon the amount of tax that has been deducted from the income on which you are claiming repayment. The most common claim is in respect of Gift Aid. Here for every £1 given by individual donors the charity will receive an extra 28p (whilst the basic rate of tax is 22%).

How can the charity reclaim 28p when basic rate tax is 22%?

This is because the basic rate tax is calculated on the gross amount of the donation. A net donation of £100 when grossed at 22% gives the sum of £128. The tax repayment is therefore £128 less £100 which is £28 (whilst the basic rate of tax is 22%).

How do I calculate the tax on a donation?

Multiply the amount of the donation by 22/78. In the example above, multiplying £100 by 22/78 gives you the figure of £28 (whilst the basic rate of tax is 22%).

How long will it take to get our money?

We aim to repay all claims within 10 working days. When a charity claims repayment for the first time the process can take a little longer, as we need to ensure that all appropriate details about the charity and its authorised official are held.

Why do you need an official authorisation form?

Repayments need to be made securely, and the details asked for are essential for us to be satisfied that, as far as possible, this is the case.

Why do you need personal details?

Because you are the person making the claim on behalf of the charity. HMRC Charities need to be sure who we are dealing with before making repayments.

There are gaps in my paperwork, what do I do?

It depends on what is missing. Our audit requirements are explained at paragraph 7.2.1 of our guidance notes.

What about VAT?

Organisations recognised as charities by the Charity Commission, OSCR or HMRC by either registration as charities or by exemption from registration are eligible for charity VAT reliefs.

Responsibility for VAT also lies with HMRC. Detailed advice and information can be obtained from the VAT areas of the HMRC web site.

How much tax must I pay to donate by Gift Aid?

Donors have to pay an amount of income tax and/or capital gains tax, whether at the basic rate or some other rate, equal to the tax deducted from their donations.

I only pay tax on my investment income; can I still donate by Gift Aid?

Yes, but remember you must have paid enough tax to equal what the charities you have given to will reclaim. For every £1 given the charity will claim 28p (whilst the basic rate of tax is 22%).

Can you tell me about a charity's financial affairs?

No, a charity is entitled to the same level of confidentiality as any other taxpayer.

Where can I find out information about a charity?

For charities in England and Wales the Charity Commission can give certain information. The Office of the Scottish Charity Regulator (OSCR) provides similar information for charities in Scotland. There is no equivalent for charities in Northern Ireland.