I’ve recently helped a couple of charities, get to grips with claiming Gift Aid. Small voluntary organisations can find the process a little daunting and maybe put off claiming, but the rewards are well worth a little effort I recently helped one organisation claim back almost £8,000 tax relief on Gift Aid and GASDS, which had been left unclaimed over the last few years.
Firstly - how it works
Gift Aid is a government scheme, that allows a UK taxpayer to donate to charity and the charity can reclaim the income tax paid by the donor on the donation - 25p for every £1 donated.
For e.g. Delilah earns £100, and pays income tax at 20% basic rate. £20 is deducted and she will receive £80 after Tax.
If Delilah then gives £80 to charity and completes a Gift Aid Declaration, the charity can reclaim the £20 tax, that Delialh has paid. So, the charity gets £100, an extra 25% on top of Delilah's gift of £80.
Gift Aid applies to any organisation with charitable status and registered with the Charity Commission. Community Amateur Sports Clubs (CASC’s) may also be eligible to claim Gift Aid, check this link for eligibility. https://www.gov.uk/register-a-community-amateur-sports-club
Understanding the Rules
There are certain conditions for reclaiming tax on a donation.
- It must be from an individual, not a company or a business
- Cannot be a payment for goods or service
- Donor must be a UK taxpayer and must have paid enough tax in total to cover the tax being reclaimed by the charity. This bit is really important as the current personal allowance is £11,500. Many part time workers and those whose taxable income is less than this, cannot give under Gift Aid.
- The donor must have signed the Gift Aid declaration and provided sufficient information to identify them – surname, initials, home address and post code, is a minimum requirement.
- Donor must not get any trivial benefit from the donation – for example, receiving tickets for an event, or similar.
Check out the Gov.uk website for full details. https://www.gov.uk/claim-gift-aid
Getting an HMRC charity login and password
Most Gift Aid submissions are completed via Charities Online, using either a spreadsheet, or database software. Blank spreadsheets can be downloaded from HMRC and must be saved in the ODS format. GASDS, can also be claimed this way, I will talk about GASDS in another blog. Bear in mind, the spreadsheet has been specially designed by HMRC, so can be a little clunky.
So, to get things started, you will need and account for Charities Online, and a HMRC Gift Aid reference number – Not the same as your charity commission registration number… that would be a tad too easy.
First off, register as an organisation with Government Gateway. Once you’ve received an activation code, you’ll need to register with HMRC Online, and finally Charities Online. You will need bank account and financial details, official’s details including National Insurance numbers (officials must be identified as fit & proper persons who are authorised to make claims on the charities behalf – Trustees, staff or an authorised Agent) charity registration number, charitable objectives and governing document.
Once this is all done you can log on to make your repayment claim and upload the completed spreadsheet, showing donors details and amounts given.
Be aware that HMRC retains the right to inspect your books, and if problems were found on a Gift Aid audit, the charity could have to repay large amounts of tax reclaimed and may receive a penalty.
For a charity with a very small number of donors, there is an option to complete a paper based form ChR1, this can be completed by hand and posted back to HMRC. These can only be obtained from HMRC, as they are personalised to the charity making the claim.
Your deadline to claim Gift Aid depends on how your charity is set up.
You need to claim for a donation within 4 years of the end of the financial period you received it in. This could be the tax year (6 April to 5 April) if you’re a trust or your accounting period for a charity or CASC. Regular monthly Gift Aid donations are claimed at the end of the charities financial year.
Small donations under the Gift Aid Small Donations Scheme is within 2 years of the end of the tax year that the donations were collected in. GASDS are worth a blog of their own, so I’ll cover this at a later date.
Every little adds up
Once you everything set up and have the processes in place, it's really worth claiming on every donation, even small ones. If a supporter gives £5 a month, that’s £60 a year. (Regular monthly donations are claimed annually to correspond with your accounting period.) You would be able to claim £15 in tax reclaim.
If you had 25 supporters all giving £5 a month, you would add and extra £375 to your income in reclaimed tax.
This blog is for general outline guidance only, always read the full guidance on Gift Aid and what can and can’t be claimed, e.g., events and church collections etc., This is regularly updated, as the rules do change. Full guidance can be found here: https://www.gov.uk/guidance/gift-aid-what-donations-charities-and-cascs-can-claim-on
If you’re a small charity and need any help with Gift Aid, or keeping your monthly accounts in order, please contact me on 01983 619520.