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Gift Aid is 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.
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Gift Aid is an easy way to help your charity or CASC maximise the value of its donations. You can reclaim tax from HM Revenue & Customs (HMRC) on the 'gross' equivalent of donations, their value before tax was deducted at the basic rate, currently 20 per cent. You can work out the amount of tax you can reclaim by dividing the amount donated by four. This means that for every £1 donated, you can claim an extra 25 pence.
If a donor is a higher or additional rate taxpayer, they too can benefit from tax relief as they can claim relief equal to the difference between the higher rate of tax at 40 per cent or 45 per cent and the basic rate of tax at 20 per cent on the total value of the donation - a total of 20 per cent and/or 25 per cent. So if £1 was donated, the 'grossed up' donation would be £1.25 and a donor liable at the 40 per cent tax rate could claim relief of 25 pence (20 per cent of £1.25).
The donor must pay at least as much UK tax (Income Tax and/or Capital Gains Tax) as the amount of Income Tax that you’ re reclaiming. If a donor makes a number of Gift Aid donations, including to other charities and CASCs, they must pay a sufficient amount of UK tax on the total amount of those donations and they may be required to pay any shortfall in tax paid to HMRC. You must advise the donor of their tax requirement and keep a record of your notification along with the donor's confirmation - known as a Gift Aid declaration.
John is a 40 per cent higher rate taxpayer and donates £100 to charity. As he pays regular Income Tax on his earnings, the basic rate of tax on his donation has already been covered by his tax payments and the charity claims back the basic rate tax of 20 per cent from HMRC. So the charity is able to make a repayment claim of £25 (£100 divided by 4). As a higher rate taxpayer, John can claim the difference between the higher rate of tax at 40 per cent and the basic rate of tax at 20 per cent on the total value of his donation, so he can claim 20 per cent of £125, a total of £25.
Gift Aid can only be claimed on gifts of money from individuals, sole traders or partnerships, in any of the following forms:
Gifts made by cheque only count as received once the cheque has cleared. Your charity or CASC can accept gifts of money made in sterling or any foreign currency.
Your charity or CASC can give donors modest (low value) tokens of appreciation - called 'benefits' - in order to acknowledge a gift but there are limits on their value.
Amount of donation
Maximum value of benefits
|£0 - £100||25% of the donation|
|£101 - £1,000||£25|
|£1,001+||Made between 6 April 2007 and 5 April 2011||5% of the donation (up to a maximum of £500)|
|Made on or after 6 April 2011||5% of the donation (up to a maximum of £2,500)|
The key principle to remember is that if any donor - or person connected to the donor - benefits significantly from their donation, then their donation(s) will not qualify for Gift Aid.
The benefit limits listed above are for Gift Aid purposes only. If you give a donor a benefit in return for a payment this may be considered a business supply for VAT purposes and VAT may be due on income.
In certain circumstances some payments made to charities which are not strictly gifts - such as successful bids at a charity auction - may be treated as donations for Gift Aid purposes as long as the Gift Aid rules are followed.
You don't have to register to claim Gift Aid but a charity must be recognised by HMRC as a charity for tax purposes before HMRC will accept a Gift Aid claim. Recognition by HMRC as a charity is a separate process from registering with the Charity Commission as a charity.
Unless a sports club is a charity, it will have to register as a CASC with the HMRC CASC unit in order to be able to claim tax back on Gift Aid donations provided it meets the conditions to be registered as CASC.
Before your charity or CASC can make a Gift Aid or other repayment claim you need to nominate someone in your charity or CASC to be an authorised official or nominee. This means that they can claim/receive money on behalf of your charity or CASC.
Find out more by following the links below
Your charity or CASC must keep an auditable record of:
Records must be kept in the same format as when you received them, but can be scanned and stored electronically. Your charity or CASC must also be able to locate individual declarations on request for audit checks.
For more help you can contact the Charities Helpline. Select Option 3 for Gift Aid.