INFORMATION SHEET GIFT AID Rotary GB&I Finance Committee Issue date: February 2018 Updated: June 2020 Review date: June 2021 What is Gift Aid? Payments NOT qualifying for Gift Aid Gift Aid is a scheme operated by HM Revenue and Customs • donations of money from a company (HMRC) which enables a charity to increase the value of its • donations in the form of a loan or loan waiver monetary gifts from donors who are UK taxpayers. • gifts made on behalf of other people The tax recovered by the charity is on the ‘gross equivalent’ • gifts that come with a condition about repayment of the donation received i.e. its value before UK tax was • gifts with a condition that the charity buys goods, deducted at the basic rate. services or property from the donor • payments received in return for goods or services - Gift Aid can cover single donations of any amount or can these are not gifts e.g. payment for admission to a apply to a series of gifts without time limit. concert, payment for a raffle ticket, an entrance fee for a sponsored challenge event, etc. Claiming tax on Gift Aid donations • a 'minimum donation' where there is no choice about A charity must be recognised by HMRC as a charity for tax payment - this is simply a fee for goods or services, it is purposes before HMRC will accept a Gift Aid claim. not a gift Recognition by HMRC as a charity is a separate process • gifts made using 'charity vouchers' or 'charity cheques' from registering with the Charity Commission relevant for • donations received before the date that HMRC accepts your jurisdiction. your organisation as a charity for tax purposes. Before your charity can make a Gift Aid claim, you need to Please note amounts received from members in respect nominate someone in your charity as an authorised official of subscriptions (for funding administration and or nominee to act on its behalf in Gift Aid claim matters. capitations) and/or meal costs cannot be given under Gift Who can make Gift Aid donations? Aid as they are not for charitable purposes and cannot be classified as voluntary donations. In order to make a qualifying Gift Aid donation, donors must pay at least as much UK Income or UK Capital Gains Gift Aid declarations Tax as the amount of Income Tax that the charity is Before your charity can claim tax back on a donation made reclaiming. by an individual, you need to obtain a Gift Aid declaration Tax relief for donors from that individual - the donor. Where the basic rate of tax is 20%, the individual donor A Gift Aid declaration can be made in writing, electronically must have paid income or capital gains tax of 25p for every or verbally, and must contain certain information about £1 donated to charity under Gift Aid. The effective gross the donor. donation is £1.25. Where a verbal declaration has been made you must send For higher or additional rate taxpayers, the donor is able to the donor a written confirmation of their declaration. This claim tax relief equal to the difference between the higher must contain certain information as specified by HMRC. rate of tax paid and the basic rate of tax of 20% on the total Verbal declarations are not effective until this written value of the donation. Details of donations made under confirmation has been sent to the donor. Gift Aid are reported on the donor's tax return and any There is no set design for a Gift Aid declaration. Charities additional tax relief due is given though the Self- can choose to use their own Gift Aid declaration form Assessment system. which must contain certain information. Alternatively, It is essential for donors to keep a record of all payments they can use a HMRC model Gift Aid declaration. There are made under Gift Aid to support claims for tax relief made three separate versions covering single donations, multiple in this way. donations and sponsorship events. There is a different Gift Aid declaration form for Retail Gift Aid (see later). Donations qualifying for Gift Aid You must keep these records in support of your Gift Aid Gift Aid is only available for gifts in the form of a monetary repayment claims. Each donation included in a claim must payment unless made under the Retail Gift Aid scheme. be supported by a Gift Aid declaration. The donation may be in sterling or a foreign currency, converted to sterling at the rate on the day the gift is made. All declarations must include the following information: There is no minimum donation on which Gift Aid may be • name of the charity claimed. • donor’s name (minimum first name initial and last name) and address (minimum house name/number and post code) The information contained in this document is guidance only and should be read in conjunction with all other relevant material. • a description of the donations to which the There is a different procedure for declarations relating to declaration relates, and whether the declaration donations for sponsored events and challenges. covers only the present donation or past and/or Please refer to the HMRC website for more details on future donations as well (a tick box is sufficient) https://www.gov.uk/guidance/gift-aid-what-donations- • an explanation to the donor that they must pay at charities-and-cascs-can-claim-on#charity-auctions . least as much UK Income Tax and/or UK Capital Gains Tax as the amount that will be claimed by the charity Gift Aid claims for sponsored events and any other charities that they donate to and that If your claim includes amounts received for sponsored other taxes such as VAT and council tax do not qualify events for which there are a large number of donors, you • a statement or verbal confirmation by the donor that don’t need to include all the individual donor details. Gift Aid is to apply. A tick box is sufficient. • the date the declaration is made. Instead there is a sponsored indicator you can set on the online claim. Gift Aid declarations can be worded so that they apply to: When making a claim, you only need to provide full details • a single donation, or of the participant, the total sponsored Gift Aid amount and • a single donation plus specified past donations made the date of the event. Individual donations of £500 or in the previous four years plus all future donations. more must be listed separately on the claim. The donor is responsible for informing the charity of any You must only include in the claim donations that the changes to details provided on the Gift Aid declaration. sponsor has indicated to include in Gift Aid. You must retain all original sponsor forms. Further details can be found on the HMRC website: https://www.gov.uk/guidance/gift-aid-declarations- Selling donated goods on behalf of individuals (Retail Gift claiming-tax-back-on-donations. Aid) ‘Benefits’ given in return for donations This process is exclusive to charity shops that operate a retail Gift Aid scheme to sell goods on behalf of donors. To A charity can give donors modest (low value) tokens of maximise the amount raised, charities can sell valuable or appreciation - called 'benefits' - to acknowledge a collectable items donated to a shop. This can be at a donation, but there are limits on their value. The key commercial public auction or an online auction website. principle to remember is that if any donor or person connected to the donor, benefits significantly from their Money raised by selling donated goods like clothes does donation, then their donations will not qualify for Gift Aid. not qualify for Gift Aid. You need to explain to owners of The benefit limits for donations to one charity in any one donated items that the shop, auction or website will act as tax year are as follows: their ‘agent’ to sell goods on their behalf if the owner will give the sale proceeds (minus any commission charged) to Amount of donation Maximum value of benefits the charity as a Gift Aid donation. £0 - £100 25% of the donation If you operate a charity shop, staff and volunteers must explain the arrangements before donors complete a form £101+ 25% of £100 plus 5% of £101 appointing you as their agent. up to the total benefit value of £2,500 The owner has the right to keep all the proceeds from the sale of their goods. They can choose to donate all or part These rules still apply when a family member or a of the amount. You can claim Gift Aid on the agreed company run by the donor receives the benefit. amount after any commission (including VAT) has been The benefit limits listed above are for Gift Aid purposes deducted. only. If you, as a VAT registered business, give a donor a The owners of donated goods will usually make a Gift Aid benefit in return for a payment this may be considered a declaration when they ‘sign up’ for the scheme before you business supply for VAT purposes and VAT may be due on sell their goods. income. Payments for the following usually cannot come within the There are three methods of operating Retail Gift Aid and Gift Aid scheme: further details can be found on the HMRC web site at • to purchase books, jumble sale items, food, etc, https://www.gov.uk/guidance/gift-aid-what-donations- • for admission to events (jumble sales, concerts etc) charities-and-cascs-can-claim-on for more details.