Gift Aid: How it works

At a glance

What is Gift Aid?

Gift Aid is an Income Tax relief designed to benefit registered charities and Community Amateur Sports Clubs (CASCs).

• Unless otherwise indicated in this guide, the term 'charity' includes a CASC.

Under Gift Aid, a charity may claim a tax refund when it receives a donation payment from a taxpayer who is an individual. 25p will be refunded for every £1 donated using Gift Aid.

• The individual donor must have paid sufficient Income Tax or Capital Gains Tax to cover the grossed-up amount of the donation made, otherwise, they will have to repay HMRC the tax refunded to the charity.
• The relief is set out in Chapter 2 Part 8 ITA 2007.
• Gift Aid relief does not apply to donations made by companies.

How Gift Aid works

Tax relief for the charity

• A donation made under Gift Aid is treated as if it has been received by the charity net of basic rate tax.
• The charity is then able to reclaim the basic rate tax credit.

For example

If an individual taxpayer donates £100, the charity can reclaim an additional £25 (£100 x 20/80) from HMRC. 

Tax relief for the donor

• A donor who is a basic rate taxpayer will receive no further tax relief as a result of making a donation.
• A donor who is a higher and/or additional rate taxpayer will be able to claim tax relief, via their tax return or their tax code, on the difference between the higher/additional rate tax and the basic rate on the grossed-up donation.

For example

An individual taxpayer donates £100 and the charity can reclaim an additional £25, giving a grossed-up donation of £125.

Where the taxpayer is a 40% taxpayer, £25 (40%-20% x £125) can be reclaimed, giving a net donation cost of £75.

Where the taxpayer is a 45% taxpayer, £31.25 (45%-20% x £125) can be reclaimed giving a net donation of £68.75.

What form of donation qualifies for Gift Aid?

• Gift Aid applies to qualifying money donation payments, made by individuals who have made a Gift Aid declaration.
  • Note that not all charities are registered for Gift Aid. Where a donation is made to a charity which is not Gift Aid registered, a Gift Aid declaration cannot be made and the donation will not qualify for tax relief under the Gift Aid rules. 
• Providing certain qualifying conditions are met, payments for subscriptions, memberships or sponsorship may also be Gift Aided.
• Gift Aid is restricted where the donor receives a valuable benefit as a consequence of making a donation. The acceptable benefit limits are set out in the Income Tax Act 2007.
• Loan repayments and refund waivers may qualify under certain circumstances.

Getting started

To operate Gift Aid, a charity is required to:

• Be properly constituted and registered with its appropriate supervisory body.
• Apply to HMRC to obtain a registration number and claim its tax repayments on gift-aided donations.

To claim a tax repayment a charity is required to:

• Ensure that donations are supported by Gift Aid declarations.
• Maintain sufficient records for audit trail.
• Claim using HMRC’s online service or use bespoke software or, in cases where online filing is impossible, file on a paper form ChR1.
• See Compliance tab.

Gift Aid Small Donations Scheme (GASDS)

The Small Charities Donations Act 2012 allows charities to claim a new Gift Aid style tax refund on up to £8,000 per year of small donations received from individuals where the donation is not subject to a Gift Aid declaration. 

Small donations are of a value of up to £30 and are donated either in cash or by contactless card.

Charities with two or more community buildings can choose whether to claim on a UK-wide basis, where the £8,000 limit applies to all UK donations or on a community-building basis. This provision does not apply to CASCs.

If the charity claims on a community building basis, they can claim up to £8,000 of small cash donations made in the same Local Authority Area for each community building.

Key areas of difficulty for charities and their advisers

The Gift Aid legislation contains a series of complicated rules in respect of associated benefits. These are explained in more detail in the Overview tab.

The GASDS rules contain some special rules for applying the cap for connected charities and charitable activities run from Community Buildings, these are discussed in the GASDS section.

HMRC provides some detailed guidance on dealing with specific forms of donations in different sectors. These are discussed in more detail in the Special Cases section.

Non-Gift Aid: other types of gift

• Shares, securities or real properties to charities (Part 8 Chapter 3 ITA 2007).
• Trading stock (S.108 -110) ITTOIA 2005.
• Payroll giving (Part 12 ITEPA 2003).

Companies and Gift Aid

• Charitable companies can reclaim Gift Aid on donation payments made by individuals.
• Donations made by companies to a registered charity or CASC are not within Gift Aid relief. However, a company may receive Corporation Tax relief on the charitable donations it makes as a deduction from its profits.

What's new? 

Budget 2024

From TBC:

• The Gift Aid legislation will be amended to ensure that eligible charities which operate subscription models can continue to claim Gift Aid while complying with the Digital Markets, Competition, and Consumers Bill.
• It is intended that these amendments to the Gift Aid regime will be in place by the time the relevant provisions of the Bill come into force.

See Spring Budget 2024: Income Tax Claims and Reliefs

One-to-many letters

• In May 2023, HMRC commenced a one-to-many letter campaign focusing on Gift Aid repayment claims by charities. 
• The educational letters issued aim to assist charities in ensuring their Gift Aid claims on aggregated donations are right, by reminding them of the requirements. 

See Gift Aid one-to-many letter

Consultation: charities tax compliance

• In April 2023, HM Revenue and Customs launched a new consultation ‘Charities tax compliance’ which explores possible changes allowing HMRC to tackle charities that obtain relief in ways that are not intended. 
• This explores issues such as:
  • The rules surrounding tainted donations. 
  • Charities failing to meet filing obligations and whether withholding Gift Aid repayments may be an appropriate response. 
• The consultation runs from 27 April to 20 July 2023. 

See Charities tax compliance consultation

On 27 April 2023, it was also announced that HMRC will continue to engage with the charities sector to improve the way that Gift Aid works by using digital technology to minimise administrative burdens. HMRC are currently looking at how the Gift Aid service can be improved for everyone who uses it.

Finance (No2) Act 2023 provides that from 15 March 2023

• There is a restriction on charitable tax reliefs so that they only apply to UK charities and Community Amateur Sports Clubs (CASCs). 
• EU and EEA charities registered with HMRC as of 15 March 2023 which HMRC have previously accepted as qualifying for reliefs and exemptions will have a transitional period until April 2024. 
• The taxes affected are Income Tax, Capital Gains Tax, Corporation Tax, Inheritance Tax, Stamp Duty, Stamp Duty Land Tax, Stamp Duty Reserve Tax, Annual Tax on Enveloped Dwellings and Diverted Profits Tax.

With retrospective effect: 

• Finance Act 2022 includes amendments to the Discovery provisions to ensure that HMRC can use its powers of discovery to recover certain tax charges, including Gift Aid donation-related charges as well as the High-Income Child Benefit Charge and some Pension charges. 

See Discovery Assessments: Finance Act 2022 changes

Overview

Donations that qualify for Gift Aid

A donation will qualify for Gift Aid relief provided that:

• It is accompanied by a Gift Aid declaration.
• Conditions A to F (the 'Gift Aid Conditions') are met:

1. The gift is a payment of a sum of money.
2. The payment is not subject to any repayment conditions.
3. The payment is not a donation under the payroll giving scheme (section 713(3) ITEPA 2003).
4. The payment is not deductible in calculating the donor's income.
5. The payment is not related to any arrangement involving the acquisition of property by the charity from the donor or persons connected to him.
6. Any benefits associated with the gift do not breach certain set limits ('benefits').

What is a gift?

A gift includes a payment for no consideration or in consideration of a small benefit.

• Payment in return for goods, rights, or services is not a gift.
• An overpayment over and above the market value of goods, rights, or services can be a gift.

What is a payment?

A payment includes payment by cash, cheque, direct debit, credit card, debit card, postal order, standing order, banker's draft, telegraphic or online banking transfer.

A sum of money

A 'sum of money' can be in any currency. It excludes:

• A gift of services or non-cash assets.
• A release of a debt or a waiver (see 'Non-Gift Aid: other types of gift' in the 'At a glance' section).
• An accounting or book entry.
• A gift by will.

Cryptoassets are not considered to be currency or money by HMRC and therefore do not qualify for Gift Aid. To benefit from Gift Aid it would be necessary for the donor to convert the cryptoassets into money before donating. Any Capital Gains Tax implications of realisation should be considered. 

Gift Aid can apply to payments made of:

• Subscriptions.
• Membership fees.
• Successful bids at charity auctions and fund-raising events.
• The proceeds of the sale of the donor's goods.
• Sponsorship payments.

In May 2021, HMRC issued guidance confirming that Gift Aid can be claimed on waived refunds and loan repayments, provided that the charity holds a record of the formal waiver and the wider Gift Aid conditions are met.

Only the capital part of a loan waiver can qualify for Gift Aid. HMRC's view is that waived interest cannot qualify as a the lender has never paid a sum of money to the charity equivalent to that interest.

The nature of the formal waiver will depend on the value waived.

• For small amounts, the charity should keep an auditable record of correspondence between the charity and the taxpayer, confirming that no refund is required and that this amount is to be treated as a donation.
  • Examples include:
    • An email exchange.
    • A letter sent to the taxpayer and their response.
    • A recorded telephone call.
  • HMRC give the example of “a couple of tickets to a fund-raising event, which has been cancelled” as being a small amount.
• For amounts that are more than nominal, HMRC expects there to be a legally enforceable document in place, which must be retained by the charity. This would include:
  • Details of what is being waived (making it expressly clear that the lender is giving up all legal rights to any future repayment).
  • Confirmation that the amount waived is to be treated as a donation for Gift Aid.

HMRC expect the charity to explain to the individual that they have a choice between:

• Obtaining a full refund.
• Waiving the right to a refund and having this classed as a qualifying donation.

The individual should be under no pressure in making this decision, and must positively choose to waive their right.

Gift Aid does not apply to:

• Gifts of money with repayment conditions attached.
• Payments for goods or services.
• Set participation fees.
• Payments made using charity vouchers or cheques.
• Barter transactions.
• Gifts from companies.
• Membership fees to CASCs.
• Gifts of cryptoassets. 

Repayment conditions

Condition B is that the payment is not subject to any repayment conditions.

In Champions Fun Learning Centre (a charity) v HMRC [2018] TC06685, the First Tier Tribunal (FTT) considered whether the possibility of a refund amounted to a condition as to repayment. It concluded that the possibility of a refund of itself is not such a condition, but if a payment were refunded, it could not be a gift. 

Benefits

• Gift Aid is restricted where a charitable donor receives a valuable benefit as a consequence of making a donation.
• The level of benefit that is permissible is strictly calculated according to the size of the donation.
• It can be difficult to value benefits, especially where there is no commercial equivalent.
• There are some oddities within the rules: for example, free entry to view a charity property in return for a donation that is at least 10% more than the usual admission charge fee is not treated as a benefit.

Defining benefits

A benefit is treated as being associated with a gift if the donor or a person connected to them receives the benefit as a consequence of making the donation.

The value of any benefit must not exceed defined limits in order to meet Gift Aid condition F.

This test is decided based on the result of a benefit value test.

• For single gifts: on a benefit value per gift basis.
• For a series of gifts: on the basis of aggregate value.

Benefit Value Tests

Per gift

As of 6 April 2019, the maximum benefits are set at:

Donation	Maximum benefit
Up to £100	25% of the donation
Over £100	£25 plus 5% of the donation from £101 up to a maximum of £2,500

These limits apply to each donation made.

For example: Pam makes four unconnected donations to a charity as follows: £20 on 11 April 2021, £35 on 8 July 2021, £15 on 30 November 2021 and £85 on 3 January 2022. In respect of the final donation, she receives a book worth £30. No other benefits were received.     As no benefits were received in respect of the first three donations, they pass the relevant value test.  The value of the book received (£30) in respect of the fourth donation exceeds the benefits limit of £21.25 (£85 x 25%) and therefore fails the relevant value test and does not qualify as a Gift Aid donation.

Where a donor makes a series of gifts

The Aggregate Value Test ensures that the maximum benefit that can be received by the donor taking into account all Gift Aid donations made during the tax year is £2,500.

For example: Phil makes two donations of £50,000 to his favourite organic farming charity in 2021-22 and in gratitude, it gives him holiday vouchers which entitle him to discounts worth £2,500 apiece. Taking each gift separately, the value of each holiday voucher does not exceed the 5% benefit test, however, the value of all the benefits received from this series of gifts amounts to £5,000 and so fails the Aggregate Value test.

Anti-avoidance: gifts and benefits linked to periods of less than 12 months 

The Benefit Value Test limits are modified in order to prevent avoidance of the benefit rules by splitting gifts.

Where gifts and benefits are linked the further conditions A, B, C or D, as follows, must be met:

Condition: A. A benefit associated with the gift relates to a period of fewer than 12 months. B. A benefit associated with the gift consists of a right to receive benefits at intervals over a period of fewer than 12 months. C. A benefit associated with the gift is one of a series of benefits which are: received at intervals, and associated with a series of gifts made at intervals of less than 12 months.

If condition A, B or C is met, then: the value of the benefit is taken to be the annual equivalent of its actual value (see below), and the amount of the gift is taken to be the annual equivalent of its actual amount.

D. A benefit associated with the gift is not one of a series of benefits received at intervals, and the gift is one of a series of gifts made at intervals of less than 12 months.

If condition D is met, the amount of the gift is taken to be the annual equivalent of its actual amount.

What is the 'annual equivalent' of a benefit or gift?

Step 1

Multiply the value of the gift and then the benefit by 365.

Step 2

If condition A or B is met in relation to the benefit (and neither condition C nor condition D is met in relation to it), divide the results by the number of days in the period of fewer than 12 months.

If condition C or D is met in relation to the benefit, divide the results by the average number of days in the period of less than 12 months.

For example Linda makes a payment of £120 to a performing arts charity and this entitles her to a five per cent discount on theatre tickets purchased in the next six months (183 days). She purchases tickets with a retail value of £350 in those six months and receives a discount of 5% or £17.50. The discount received meets Condition A (a benefit relating to a period of less than 12 months) and so the annual equivalent of the gift and benefit must be calculated.

	Annual equivalent
Payment made: £120	£240 (£120 x 365 days ÷ 183 days)
Benefit: £17.50	£35 (£17.50 x 365 days ÷ 183 days)

The annual equivalent value of the discount of £35 exceeds the small benefit limit of £32 (annualised donation of £240: 25% of £100 plus 5% of £140): Linda's donation fails the benefit test and cannot qualify as a Gift Aid donation.

Valuation of benefits

• A valuation can be difficult, especially where there is no market value or other method of comparison available.
• The starting point is that a benefit is valued based on the value to the recipient rather than the cost to the charity of providing it.
• Where a benefit has no market comparison the method of valuation may be made by taking the cost to the charity of creating it, for example, when an event is staged that is not open to the general public the benefit might be determined by taking the cost divided by the number of expected attendees.

Items not quantified as benefits for Gift Aid Condition F

• Small benefits, provided that they fall within the tests above.
• The right of admission to view charity property if it is granted for a period of at least a year at the same time that the general public can gain admission or in return for a donation of at least 10% more than the admission charge.
• A simple acknowledgement of a donor's generosity provided that it is not an advertisement.
• Literature describing the work of the charity or CASC such as newsletters, annual reports or a members' handbook.
• Events or dinners where there is no significant element of additional fundraising involved.
• Naming rights (e.g. naming part of a building after a donor) provided these are unsolicited and not expected in return for a donation.

Extra Statutory Concessions

By concession, HMRC allows other benefits to be provided in the following circumstances:

• Split payments: if the charity can accurately establish a benefit’s market value and that product is sold separately and offered to the general public, the charity can deduct its market value from the gross donation and claim Gift Aid on the rest of the money donated.
• Averaging: the charity can average the cost of a benefit over a number of donors.
• The total cost of a lifetime benefit can be valued over 10 years.
• Literature is of inconsequential value, so literature that describes or promotes the work or objectives of the charity is assigned no financial value.

Companies and Gift Aid

Charitable companies can reclaim Gift Aid on donation payments made by individuals.

Donations made by companies to a registered charity or CASC are not within Gift Aid relief. A company may receive Corporation Tax relief on the charitable donations it makes as a deduction from its profits provided that:

• The donation does not come with a condition about repayment.
• The company or a person 'connected' to the company does not receive a benefit over a certain value in return for the donation.
• The donation is not subject to a condition or arrangement that the charity will purchase property (other than as a gift) from the company or a connected person.
• Relief is given after all other reliefs other than by group relief.
• Legislation: Part 6 of CTA 2010.
• See HMRC: Gifts to charity made by companies

Companies may also obtain tax relief on the cost of charitable gifts other than cash:

• See HMRC: Land, property or shares
• See HMRC: Equipment and trading stock
• See HMRC: Seconding employees

Special cases

Charities can claim Gift Aid relief on many different types of payments received from individuals. This section summarises some of the special rules that apply to such donations.

• Fundraising: Trips and events.
• Fundraising: Sponsorship.
• Schools: Special fundraising days.
• Educational school trips: Voluntary parental contributions.
• Educational trusts: Voluntary parental contributions.
• Church collections.
• Membership subscriptions.
• Admission fees.
• Charity auctions.
• Voluntary workers' expenses.
• Goods: When sold and proceeds gifted.

Fundraising: trips and events         

A charity may obtain Gift Aid relief on payments it receives to finance its activities such as the laying on of trips and events.

Donation payments made by both the supporters of the charity and participants taking part in a trip or attending an event may qualify for Gift Aid:

• Where a supporter makes a donation this will qualify for Gift Aid.
• Where a trip or event is free and open to general participants, those who participate are able to Gift Aid any voluntary contributions that they decide to make towards its cost.
• Attendance should not be conditional on making the donation.

How this works

Donations made by the supporters normally pass the benefit test because:

• They do not take part in the trips and events.
• They receive no benefits as a result of their payment.

This requires care: it depends on how the donation is made and whether there is someone connected to the donor going on the trip. For example, if a parent donates money to a school for their child to go on a school trip, they are not taking part in the trip but their child is and the child is of course connected to the donor.

The participants pass the benefit test because:

• The trip or event has already been funded by the contributions of others.
• There is no entry fee and so a donation made does not secure any additional benefit.

For example: A charity raises £3,000 from its supporters to stage a fundraising fireworks festival. The event is fully funded by the supporters and open to everyone. During the event participants are encouraged to make donations to the charity, these potentially all qualify for Gift Aid relief.

Payments that fail to qualify for Gift Aid

A payment made to participate in a trip or event will not qualify for relief if the payment is used by the charity to part-fund the event. This is because it fails the benefit test, the value of the benefit will in those circumstances be the equivalent to the sum paid to take part.

A participant can alternatively be asked to pay a fixed fee to cover the proportion of the costs of running the event and then separately make a donation. The donation will then be separate from the participation fee and will qualify for Gift Aid.

Summary

Donor	Qualifying for Gift Aid	Non-qualifying
Supporter	Donations made in order to fund events and activities promoting the objectives of the charity	Donations that are used to fund non-charitable activities
Participant	Donations that do not secure a benefit Unconditional donations	Participation fees, where the participant must pay to enter, pay a fee to enter or must raise sufficient funds to participate

For further information see Charity events

Fundraising: sponsorship

A charity may hold fundraising adventure or challenge-type events such as sponsored walks, cycle rides or adventure trips abroad. Participants taking part in these types of events are encouraged to obtain sponsorship which is then passed to the charity.

Where the cost is fully funded by the charity

• Where the event is fully funded by the charity and free to participants, all sponsorship payments may potentially be gift-aided.

Where the participant pays an entry fee

• Where the event is not fully funded by the charity, participants may be asked by the charity to contribute to its cost. Typically they may be asked to pay a non-refundable deposit or a registration fee and then raise sponsorship.
• To work out the value of a benefit, the charity is required to work out the cost per participant of holding the event.
• Where payment by the participant equals the cost per participant, the payment will not qualify for Gift Aid because the benefit limits are exceeded (the benefit = the cost to the participant).

For example A charity organises a cycling treasure hunt. All prizes are donated by local firms. The charity incurs advertising and printing costs. It estimates that if 100 people take part the cost per participant is £3. It also provides forms and encourages participants to obtain sponsorship to complete the hunt course. It decides to set an entry fee of £5 per head. Over 100 people take part in the event. The £5 entry fee does not qualify for Gift Aid, as the cost of the event and so the benefit to the participants is £3 per head. None of the entry fee may be Gift Aided as the benefit test is not met.

Where the participant must raise sponsorship to take part

• Sponsorship by parties connected to the participant is treated as being made by the participant and as such, they will only qualify for Gift Aid if the benefit limits are not exceeded.
• Sponsorship payments made by persons not connected to the participant are unaffected and can be gift-aided.

Conversely, if the participation cost of the event is kept entirely separate from sponsorship, Gift Aid relief may be claimed on sponsorship funding. To qualify, a participant must pay the charity the full advertised cost of the event from their own resources so that the value of the donor benefit is reduced to nil.

For example A charity organises a trek across Africa. It calculates that the cost of the trek amounts to £1,000 per head. It asks participants for a deposit of £250 and requests that they raise sponsorship of at least £2,000 in order to take part in the trip. The benefit of the trip is the cost less deposit paid = £750 (£1,000 - £250). Brenda decides to take part in the trek, she raises £2,500 in sponsorship. The benefit of the trip of £750 is more than £145 ((25% x £100) + 5% x £2,400)) and so none of her £2,500 sponsorship qualifies for Gift Aid. Alternatively, if Brenda had agreed to pay £750 to the charity on her own account, all the sponsorship money collected would have qualified for Gift Aid. Note that: there are restrictions where sponsorship is provided by connected parties, see below.

Sponsorship and connected persons

When a participant is required to collect sponsorship in order to participate in an event, any sponsorship pledged by a person connected with the participant is treated as if it was donated by the participant. This has a significant effect on the benefit value tests.

Charities should take all reasonable steps to ensure that Gift Aid payments are not received from persons connected to a participant in order to avoid breaching the benefit value tests. HMRC expect a participating charity to include in the event literature and on the sponsorship form:

• An explanation that sponsors connected to a participant cannot make their donations by Gift Aid.
• The definition of a 'connected person'.

What is a 'connected person'

A person is 'connected' with a donor if that person is:

• The wife, husband or civil partner.
• A relative (brother, sister, ancestor e.g. mother) or lineal descendant (e.g. grandson).
• The wife or husband of a relative.
• A company under the control of the donor, or under the control of connected persons.

HMRC has produced a template sponsorship form.

For further information see Adventure fundraising events

Schools: special fundraising days

Schools with charitable status may hold special fundraising days to raise money for themselves or in support of external charities. Typically, on a 'non-uniform' day, children donate a small sum, usually £1 and in return are allowed to wear their own clothes for the day. Similar days may feature 'crazy hair', 'mad hatters' or 'wrong trousers'.

HMRC holds the view that as the children are required to donate to take part in the fun day, the benefit of the event is the donation and so the benefits value test is not met. Where a donation is not mandatory and children can participate even when they fail to donate, then all donations made should potentially qualify for Gift Aid relief.

Where a school holds a special fundraising day for an external charity, it receives donations as an agent for the charity and has no entitlement to the donations it receives. The charity can claim any Gift Aid relief (providing that any donations are accompanied by a Gift Aid declaration and audit trail).

For further information see Gift Aid for school charities

Educational school trips: voluntary parental contributions

Where a school asks parents to contribute to the cost of a school trip, a parental contribution may qualify for Gift Aid relief in certain circumstances.

• A school may ask parents for voluntary contributions in respect of an educational trip (or any other event).
• If a school trip is fully funded by the school or others and will go ahead irrespective of any parental donations, then any voluntary parental contribution made will be eligible for Gift Aid.
• A voluntary parental donation will not qualify for Gift Aid relief if it secures any special treatment or benefit for the pupil, is refundable, or is conditional on other parental gifts.

Where parents are asked to contribute toward the cost of a school trip which will not go ahead without parental funding, the payment will only qualify for Gift Aid where the benefit arising from the donation does not exceed the maximum permitted, see the example below.

The rules in this area are also complicated by the fact that different types of schools face further restrictions. Whilst many private schools retain charitable status, state-funded schools are not permitted to charge pupils for visits undertaken as part of the National Curriculum which occur during school hours.

For example A school visit has been arranged to a local museum, it is fully funded by the school and available to all pupils. Parents are asked to make voluntary contributions. The benefit to the child of the donation is £nil because the trip has already been funded by the school.

Participation payments and benefit limits

A benefit is calculated on the basis of the average cost per pupil including travel costs, trip insurance, cost of entry and associated educational material, cost of food and drink supplied and any other costs associated with the trip (costs averaged per pupil if appropriate).

For example The school asks parents for a voluntary contribution of £10 in order to fund a half-term trip to a gallery. The trip will not be able to go ahead without parental contributions. The cost of the trip works out at £8 per pupil (transport £5 entry £2 and brochure £1). The benefit value of the trip is therefore £8 per pupil. A payment of £10 cannot be made under the Gift Aid scheme as the benefit of £8 exceeds the 25% limit (it is 80%). If a parent wishes to make a voluntary contribution towards the trip that qualifies for Gift Aid it should be either: Made separately. Ensured that the benefits level is not exceeded. So, a parent may decide to pay £10, as requested and then may choose to pay: A separate donation under Gift Aid for an extra amount. £32 and the whole payment will qualify for Gift Aid, as the benefit of £8 is no more than 25% of the gift.

For further information see Gift Aid for school charities

Educational Trusts: voluntary parental contributions

An Educational Trust may be established to provide education for children as an alternative to State education. Parents are often not required to pay any set fees to cover the costs of tuition and other overheads but instead may make payments described as donations.

• Parental donations will only qualify for Gift Aid where HMRC can establish that the Trust would be able to meet the costs of providing the education in the absence of the donations.
• A payment (by donation or otherwise) made in return for educational benefits provided does not qualify for Gift Aid.
• Where a Trust is independently financed (by regular fees, regular donations, endowment or grant funding) and it is not dependent on additional parental donations, the cost of providing tuition etc for that parent’s child will not be treated as a benefit in consequence of the parental donation. Providing the other Gift Aid criteria are met, Gift Aid relief might be available on those donations.

HMRC says that the situation for each Trust is to be judged on its own merits.

For further information see HMRC: School charities

Church collections

Charitable churches

A church may be recognised as a charity by HMRC. All donations received from collections or other means may attract Gift Aid relief provided that they are accompanied by a Gift Aid declaration.

• Gift Aid declarations on collection envelopes: a donor's details can be recorded on the envelope which can then be retained as part of the charity's audit trail.
• Regular donors should complete a single Gift Aid declaration to Gift Aid all future donations paid.

Churches collecting on behalf of charities

A church may make collections on behalf of various charities and these may qualify as Gift Aid donations.

If the church has not exercised any discretion in collecting donations so that donations are merely given to the church to pass on to a particular charity then:

• The church has no entitlement to the donations it collects on behalf of the charity.
• The charity is able to claim any Gift Aid relief (providing that donations are accompanied by a Gift Aid declaration and audit trail).

If the church exercises its discretion and decides to open a fund for donations to a particular charity, then:

• The fund collected becomes a designated fund of the church.
• The donations form part of the church’s income.
• The church is able to claim Gift Aid relief (subject to the normal requirements).

It is expected that the Gift Aid tax reclaimed should be passed to the charity by the church.

For further information see HMRC: Church collections

Membership subscriptions

A payment made in respect of a membership subscription to a charity or CASC is treated as a gift provided that the following conditions are met:

• The payment does no more than secure membership of the charity.
• The payment does not secure a right to personal use of any facilities or services provided by the charity
• Membership paid for another person will not qualify as this is a gift to the individual and not the charity.

Benefits and subscriptions

A benefit received as a result of the payment of a subscription is not treated by HMRC as a benefit for the purposes of the Benefit Value Test, including:

• The receipt of periodic newsletters explaining the work of the charity.
• An opportunity to visit and view the work of the charity.

A subscription payment that enables the donor to use the charity's facilities will not qualify for Gift Aid as it secures a benefit (subject to the Benefit Value Test limits).

Personal use of facilities or services may include:

• Various training or playing benefits obtained for an additional fee over and above basic membership.
• Individuals’ tuition or coaching.
• Other educational instruction.
• Free or discounted use of, say, a golf course or a swimming pool, not available on similar terms to non-members.

Access to properties or artwork does not prevent relief, so memberships of the National Trust or English Heritage will qualify for relief.

An individual donor may pay for a family membership or on behalf of a minor child on the same terms. The donor must be the person who has given a Gift Aid declaration to the charity.

For further information see Membership subscriptions

Admission fees

A 'relevant right of admission' is disregarded as a benefit for Gift Aid.

A right of admission means a right which:

• Benefits the donor or his family members (not necessarily all at the same time).
• Authorises admission to premises or property to which the public are admitted on payment of an admission fee.
• Authorises admission to those premises or that property without payment of the admission fee or on payment of a reduced fee.

Admission conditions

A right of admission is a relevant right of admission if:

• Conditions A and B are met, and
• Either condition C or condition D is met.

Condition A: the opportunity to make a gift and to receive the right of admission as a result, is available to the public and:

• It is not conditional on making a Gift Aid declaration.

Condition B: is that the right of admission is a right granted by the charity for the purpose of viewing a property that is preserved, maintained, kept or created by a charity for its charitable purposes. Such property includes:

• Buildings.
• Grounds or other land.
• Plants.
• Animals.
• Works of art (but not performances).
• Artefacts.
• Property of a scientific nature.

Condition C: the right of admission applies during a period of at least 12 months at all times at which the public can obtain admission.

• The charity is permitted to restrict access for up to five days per year to allow for special charity events.

Condition D: a member of the public could purchase the same right of admission, and

• The amount of the gift is greater by at least 10% than the amount the member of the public would have to pay.

The same right of admission

This means a right relating to the same property, classes of persons and periods of time as the right received in consequence of the gift.

Summary

Type of admission	Non-qualifying for Gift Aid	Qualifying for Gift Aid
To view charity property: open to the general public	The standard entrance fee A reduced entrance fee following a donation	A donation to allow admission for 12 months A donation to allow admission that is at least 10% higher than the standard entrance fee The right of admission must not be made conditional upon the donor making a Gift Aid declaration
To view: non-charity property, or use charity facilities or gain access to: a performance an event	All admission fees	N/A

For further information see HMRC: Admissions to view charity property

Charity auctions

• Charities hold auctions in order to raise funds.
• They auction a range of different goods, services and often 'promises'.

A successful bid for an item at a charity’s auction can be Gift Aided provided that the benefits associated with the bid do not breach the prescribed Benefit Value Test limits.

The valuation of the benefit received in successfully bidding for an item at auction varies according to the nature of the item:

• If the item is commercially available, the value of the item for the benefit limit is the 'shop sale' price of the item.
• If the item is commercially available but it has an enhanced value, for example, because it has been owned by a celebrity, the market value is deemed to be unascertainable. This means that no part of the successful bid at auction may be gift-aided. 
• If the item auctioned is a 'promise', its benefit value will generally be the auction price, as this is assumed to be its market price, unless there is another commercial equivalent.

A charity will need to consider the valuation of each item in advance of the auction. If a charity can advise potential bidders in advance this will ensure that successful bidders complete Gift Aid declarations on the day.

For example: A charity is auctioning a range of items, the following table indicates what can and cannot be gift-aided.

Item	Valuation	Bid	Gift Aid
A new boxed set of glasses	Shop price £10	£20	No, benefits limit is exceeded
Vintage tea set	Dealer estimates £25	£100	Yes, benefit is 25% of price paid
Signed photograph of a celebrity	Unknown: auction price	£?	No, benefit is unascertainable
Promise to clean car	Local car wash £5	£10	No, benefits limit exceeded
Promise to clean car	Local car wash £5	£50	Yes, benefit is less than 25% of the price paid
Promise to 'carry your shopping for a day'	Unknown: auction price	£50	No, benefit is auction price

How to Gift Aid auction receipts

HMRC provide guidance for charities on how they might operate a workaround to the potential block on gift-aiding auction bids. If the bidder is informed by the auctioneer before the auction of the commercial value or market price of the item, the bidder may agree to purchase the item at that price. If the bidder is successful in winning that item in the auction, the amount bid in excess of the agreed purchase price is capable of being gift-aided.

For further information see HMRC: Charity Auctions

Voluntary workers expenses

A charity may reimburse voluntary workers for their out-of-pocket expenses. Provided that a volunteer does not profit from the arrangement there are no tax consequences for the volunteer.

• If a volunteer forgoes claiming the expenses they incur, the amount forgone will not qualify for Gift Aid. This is because an amount forgone is not a payment.
• A volunteer may not donate their time in lieu of a payment under Gift Aid because there is no payment made.

To make a donation that does qualify for Gift Aid, a volunteer should claim any expenses due back from the charity and then make a donation payment to the charity separately.

For further information see HMRC: Voluntary Workers expenses

Goods: when sold and proceeds gifted

Where a donor donates goods to a charity, goods do not qualify as 'payments' for Gift Aid. A donor may ask the charity to sell their goods, as their selling agent, the proceeds of the sale may then be Gift-aided back to the charity.

HMRC updated its guidance on this topic in 2013 and it now accepts three different methods by which Gift Aid may apply to the sales proceeds of goods:

• The Standard Method.
• Method A.
• Method B.

The Standard Method

A charity or its trading subsidiary may act as a sales agent on behalf of an individual donor. The proceeds of such a sale received by the charity or its associate may then be gift-aided to the charity. The seller must write and notify the donor to advise them of the sales proceeds.

• Legal or beneficial title to the goods to be sold never passes to the charity, it (or a trading subsidiary) sells the goods as a selling agent on behalf of the donor.
• The donor must complete a Gift Aid declaration before the charity markets the goods if the charity does not already hold one on their behalf.
• The charity labels the goods so that the sales proceeds can be linked back to the donor.
• When the goods are sold the charity shop writes to (or emails) the owner of the goods to advise them of the net sale proceeds. It explains that it intends to treat this amount as a gift to the charity unless the owner contacts the charity within 21 days (of the letter or email) to say they want to keep the proceeds.
• The charity shop must then give the individual at least 21 days to respond to this letter before it treats the net sale proceeds as a donation to the charity.
• The charity must use a standard method template letter (Standard Method template letter) when writing to the individual. Charities are free to add additional information to the letter or email or alter the opening and closing sections but the words in italics must be used.
• The term 'net sale proceeds' means the sales proceeds after commission and any VAT charged on the commission have been deducted.

Method A

A charity acts as a sales agent (as in the ‘Standard Method’). There is no requirement to notify the donor of the proceeds of sale and the net sale proceeds are automatically Gift Aided provided that they do not exceed £100 per year.

• The donor must complete a Gift Aid declaration before the charity markets the goods if the charity does not already hold one on their behalf.
• The charity shop obtains the agreement of the donor that if the total net sale proceeds of their goods in a year are below the agreed amount, the individual will not be offered their money back before the charity claims Gift Aid.
• The charity shop will contact the donor if the net sales proceeds from the goods are more than £100, so the individual can then confirm that they also want to donate the proceeds in excess of £100.
• The individual should also be asked if they would like to receive a letter at the end of the year informing them of the total amount raised from the sale of their goods. This is a requirement for higher-rate taxpayers who wish to claim tax relief on their donations.

The charity must use the following template letters when writing to the individual:

• Method A: template letter for Gift Aid where £100 limit is exceeded.
• Method A: template letter for Gift Aid at the end of the year.

Method B

Method B is only for use by charities that use a separate entity, such as a trading subsidiary to run the shop for them. This method is similar to Method A but a trading company receives the goods, sells them on behalf of the donor and then donates the profits to the charity. The sales proceeds are automatically gift-aided as long as they do not exceed £1,000 per year.

The charity must use HMRC’s template letters when writing to the individual:

In all cases, the charity must retain an audit trail to show:

• A copy of any written agreement made with the owner to sell the goods on their behalf.
• Documentation that the owner has either been notified of the sale proceeds and that they have been given the opportunity to receive all of the net proceeds (Standard Method) or has made an agreement under Method A or B.
• The Gift Aid declaration, together with the donor's name and address.
• Records to show how the goods are identified as belonging to a particular owner.
• Records to show the total donations Gift Aided under all methods per donor in order to provide higher rate taxpayers with the information to complete their Self Assessment returns.
• In the case of a trading subsidiary of a charity, records should show how the sale proceeds are remitted to the charity.

Acting as a sales agent may have unforeseen additional tax consequences for the charity or its trading subsidiary:

• Selling activities are likely to amount to trading. The charity may be liable to direct tax on any profits.
• It may be required to VAT register if its business activities exceed the registration threshold.
• The gift may fail as the potential donor may decide that he wants to retain his sales proceeds.

For further information see HMRC: Claiming gift aid when goods are sold by, and the proceeds gifted to charities

Finance Act 2019 included the following changes from April 2019:

• Charity shops using the Retail Gift Aid Scheme can send letters to donors every three years rather than every year when their goods raise less than £20 a year.
• The small trading tax exemption limit for trading not related to a charity's primary purpose will be increased as follows:

Annual charity income	Max non-primary purpose income
Under £32,000	£8,000
£32,000 - £320,000	25% of income
Over £320,000	£80,000

 

The Gift Aid Small Donations Repayment Scheme (GASDS)

Key features of GASDS:

• Charities are able to claim a tax refund or 'top-up payment' (25%) on small cash and contactless payment donations of up to £30 per donation.
• These donations must be made without a Gift Aid declaration.
  • There is no tax relief for the individual donor. 
• Any cash donations which are made with a Gift Aid declaration are excluded because these are accounted for under Gift Aid, which is separate to GASDS.
• The tax refund is calculated as for Gift Aid: cash donation x basic rate tax%/100 less basic rate tax % (20%/80%).
• There are separate rules and limits where donations are collected in a community building.
• Connected charities will impact the claim limits.

Conditions for GASDS

The charity claimant:

• Is a charitable trust or company registered by HMRC as a charity or CASC for tax purposes.
• It receives cash (or contactless card) donations from individuals which do not also qualify for Gift Aid.
• It banks all the cash donations in a UK bank or building society account.
• It receives donations under Gift Aid.
• It makes a claim under Gift Aid in the tax year.
• The maximum top-up that can be claimed is £2,000 (25% of £8,000 the donation limit).
• It had not incurred a penalty under Schedule 24 Finance Act 2007, or regulations under section 11 SCDA 2012, on a Gift Aid or GASDS claim made in the current or previous tax year.

The donation:

• Cash donations.
• Contactless card donations from 6 April 2019.
• Up to 5 April 2019: a maximum of up to £20 per individual donor.
• From 6 April 2019: a maximum of up to £30 per individual donor.
• No benefit must attach to the cash gift but a badge or sticker of negligible value may be given to the donor.

The claim:

• The annual donations limit for a claim cannot be more than:
  • 10 times the Gift Aid claimed in the tax year, or
  • £8,000, if lower. (If there are connected charities, this limit is apportioned between them).
• A maximum donations claim of £8,000 will give rise to a top-up payment of £2,000.
• More may be claimed if the community-building rules apply (see below).
• Claims can be made for donations that qualify for Gift Aid.
• Claims cannot be made for membership fees.
• The claim itself is made in the same way as Gift Aid.
• The deadline for submission of a claim under GASDS is 2 years from the end of the tax year in which the small donation was made. Any donations collected under the GASDS should not be included within the Gift Aid schedules.

Record keeping

Records of the following must be kept:

• Total cash collected.
• Receipts of contactless donations.
• Date of collection.
• Date paid into the bank account.

Collections in community buildings

A charity can choose whether to claim either:

• Up to £8,000 on donations made anywhere in the UK.
• Up to £8,000 on donations per community building.

CASCs can only choose the first option as the second is not available to them.

Where the second option is chosen, only donations made in the same Local Authority area as the community building will qualify for relief.

Community Building:

A community building qualifies if it has been used to host at least six of the charity’s charitable activities in the tax year, provided:

• Each was attended by at least 10 people in the class of people whom the charitable activity was meant to benefit.
• The activity was open to the public (or a section of).
• The activities must be group activities.
• There must no requirement to pay to access the building.

Connected charities:

Connected charities for GASDS are those under common control with similar purposes and activities.

Where one or more connected charities have a community building, all of those connected should claim under the community building rules. Alternatively, they can choose to share the single claim limit of £8,000 for all donations made in the UK. To do this, all the charities must make an election in writing to HMRC.

Connected CASCs or connected charities without a community building must share the £8,000 limit for UK donations.

Specified amount

The 'specified amount' is the maximum donation limit that applies to claims.

Example 1

A charity has one community building. During the tax year 2022-23, it collects £10,000 in small donations. This charity can only claim top-up payments on donations up to £8,000 collected anywhere in the UK.

Example 2

A charity has two community buildings. During the 2021-22 tax year, it collected £10,500 of small UK donations as follows:

• £2,000 in the Local Authority area of building A.
• £1,500 in the Local Authority area of building B.
• £7,000 outside of the Local Authority area of these buildings.

This charity is better off claiming a single £8,000 allowance on small donations collected anywhere in the UK.

Example 3

The same charity as in example two has the following small donations:

• £5,000 in the Local Authority area of building A.
• £4,000 in the Local Authority area of building B.
• £6,000 outside the Local Authority area of these buildings.

In this case, it is better to claim based on the community buildings. This would enable the £5,000 and £4,000 to be claimed i.e. £9,000. The maximum claimable under the single method would be £8,000.

Example 4

The same charity has the following small donations:

• £9,000 in Local Authority area of building A.
• £1,500 in Local Authority area of building B.
• £10,000 outside the Local Authority area of these buildings.

Again, the community-building method would be better for the charity. £8,000 can be claimed relating to building A and £1,500 relating to building B i.e. £9,500, compared to £8,000 if the single limit was used.

Compliance

Charities have to observe the detailed qualifying conditions and they need to ensure that:

• They are not double-counting some cash donations which are made by donors who have already signed enduring Gift Aid declarations.
• That they are not claiming GASDS on donations made of more than £30 per individual.
  • HMRC accept that it can be difficult in some cases to be certain whether a donation was £30 or less, for example, church plate collections.
  • HMRC has confirmed that rolled-up small donations will be accepted in one larger collection. This came to light during COVID-19 when church members did not make their weekly donations to the church.
  • Reasonable steps should be taken to ensure all donations are eligible:
    • Instruct collectors to record donations over £30.
    • Exclude any £50 notes from the claim.

Meaning of 'connected'

In order for there to be any connection, the activities of two charities must be the same or substantially similar otherwise the connection tests do not apply.

A charity is treated as being connected to another charity and any other charities to which that charity is connected in the tax year:

• Connected is defined by s.993 ITA 2007 as modified (as below) but excluding s.993(3).
• A charitable trust is treated as if it were a company (and so 'a person').
• Individual trustees are connected to other individuals if they are relatives, spouses or civil partners.

In summary, a charitable trust has 'control' of another person where:

• Its trustees or directors have, or any of them has, control of the person.
• Two charities have 50% or more of the same directors or trustees.

Control by influence

A person (other than a charity regulator) has 'control' of a charitable trust when:

• The person is a trustee of the charity and some or all of the powers of the trustees of the charity could be exercised by the person alone or by acting together with other trustees who are connected persons.
• The person, alone or together with other persons, has the power to appoint or remove a trustee of the charity.
• The person, alone or together with other persons, has any power of approval or direction in relation to the carrying out by the trustees of any of their functions.

Control by number of trustees

A charity that is a trust is regarded as connected with another charity that is a trust if at least half of the trustees of one of the charities are:

• Trustees of the other charity.
• Persons who are connected with persons who are trustees of the other charity.
• A combination of both.

Getting started

Applying to use Gift Aid

Gift Aid can only be claimed back by a charity or Community Amateur Sports Club (CASC) that has applied to HMRC for a Gift Aid registration number and been approved by HMRC.

Registration

A charity or CASC is required to register with a charity regulator or HMRC. It depends on the type of body, its size and location.

Register with	England & Wales	Scotland	Northern Ireland
A charity regulator	Charities with an income > £5,000: the Charity Commission	All charities: the Office of the Scottish Charity Regulator	Charities with an income > £5,000: the Charity Commission
HMRC	All charities CASCs	CASCs	All charities CASCs

Application to HMRC

Once a charity has made an application to HMRC it will be given a Gift Aid reference number and may claim tax repayments under Gift Aid.

• A responsible person, who is not the tax agent is permitted to apply to HMRC.
• The responsible person should have signed a Fit and Proper Person's declaration

Declaration: fit and proper persons

Anyone acting as a manager of a charity or CASC must declare themselves 'fit and proper' to act and must complete a declaration to that effect. See Fit and Proper Helpsheet and Model declaration.

Charities

Charities register online with HMRC. You will need a Government Gateway ID for the organisation.

To qualify as a charity for tax purposes an organisation must:

• Be established for charitable purposes only.
• Be based in the EU, Iceland, Liechtenstein or Norway.
• Be registered with a regulator (see table above).
• Be managed by an 'authorised official' and 'responsible' persons.

To complete the form the following details are required:

• Full name and address of the charity.
• Contact details, email, telephone number.
• Bank account details and financial records.
• Officials' details, including dates of birth and National Insurance numbers.
• Registration number if you’re registered with a regulator.
• Details of the charitable objectives.
• The charity's governing document and date that this became effective. This can be its rules or constitution, memorandum or articles or foreign equivalent, a will or trust deed, or an Act of Parliament.

Community Amateur Sports Club (CASC)

A CASC may operate Gift Aid on:

• Voluntary donations.
• Sponsorship of individuals raising funds for the club.

CASCs are only required to apply to HMRC and not a charity regulator. They must complete a CASC application form

Registration

The following information is required to be sent with the form:

• Club's governing documents such as the prospectus, constitution, rules, or articles of association.
• The club's latest accounts.

The main purpose of a CASC is to provide facilities for eligible sports and to encourage people to take part in them.

To qualify as a CASC the club must be:

• Formerly constituted.
• Organised on an amateur basis.
• Not-for-profit and prohibited from distributing profits other than to a charity or a CASC.
• Open to the whole community.
• Set up and provide its facilities in an eligible area.
• Managed by fit and proper persons.

Benefits to members may include:

• Use of the sporting facilities and equipment along with suitable coaching.
• Medical treatment and insurance cover.
• Some reasonable costs for travelling to away matches.
• Some reasonable post-match refreshments.
• Sale of refreshments such as food and drink.

Providing that it contracts on an arms' length basis it may:

• Buy goods or services from members.
• Employ and pay staff who are also members.

CASCs and other income and gains

Many CASCs run a bar in their clubhouses and receive other sources of income (e.g. interest, property income). CASCs are entitled to exemptions from Corporation Tax on the following other sources of income and gains provided the club uses all of its income and gains for qualifying purposes:

• UK trading profits: if the turnover from the trade is <£50,000 a year (<£30,000 a year pre-1 April 2015).
• UK property income: if the total income from property is <£30,000 a year (<£20,000 a year pre-1 April 2015).
• Interest received.
• Chargeable gains.

Authorising a tax agent

The use of a tax agent is optional. A charity or CASC may authorise a tax agent to act on its behalf by completing HMRC: form 64-8 or by authorising their agent via HMRC online.

Compliance

Having obtained a registration number from HMRC, a charity can reclaim tax from HMRC under Gift Aid.

To make a tax repayment claim a charity is required to:

• Retain and record Gift Aid declarations.
• Complete a tax refund form online (on paper if online filing is impossible, with prior agreement with HMRC).

HMRC operates a 'check later' approach. A charity claiming a tax repayment under Gift Aid is subject to random checking by HMRC.

Retain and record Gift Aid declarations

• A donation under the Gift Aid scheme must be accompanied by a Gift Aid Declaration.
• A charity is required to keep sufficient records to identify donation receipts together with Gift Aid donors and their declarations.
• Charities may claim a Gift Aid style top-up on collections of up to £8,000 per year comprising of small donations without obtaining a Gift Aid declaration (see GASDS tab).

The Gift Aid declaration

The individual must give a declaration within four years of making a gift.

It can be made:

• Orally.
• In writing.

One declaration may cover one or a series of gifts. It is vital for the charity's tax compliance that it retains complete records of donations received.

Oral donations

A charity may receive donations by telephone. It is required to keep a record by audio recording or in writing of:

• The donor's name, initial and surname, their address including house number/name and postcode.
• The date of the declaration and written record.

The charity should explain to the donor that:

• They must have paid enough Income Tax and/or Capital Gains Tax to cover the amount that all charities and CASCs they donate to will reclaim for that tax year and ensure that the donor understands the charity will reclaim 25p of tax on every £1 that they have given (28p on every pound given for donations up to 5 April 2008).
• They have a right to cancel the donation within 30 days.

The charity should offer to send a copy of its written record to the donor.

A written declaration must include:

• The name of the charity or CASC.
• The amount of the donation.
• The donor’s initials and surname.
• Their house name/number and postcode.
• The date.
• A statement or tick box confirming the amount should be treated as a Gift Aid donation.
• The declaration may cover present/future/past donation(s) (see links to HMRC’s templates below).
• A confirmation that the donor was given an explanation that they must have paid enough Income Tax and/or Capital Gains Tax to cover the amount that all charities and CASCs they donate to will reclaim for that tax year and that the donor understands the charity will reclaim 25p of tax on every £1 that they have given.

Gift Aid Declarations via intermediaries

Donors can claim gift aid on donations made to charities via intermediaries. This allows, for example, websites to collect donations on behalf of individuals and Gift Aid them on behalf of charities. Donors must make a gift aid declaration in respect of each charity donated to via the intermediary.

Since 6 April 2017, individuals have been able to make one gift aid declaration per intermediary instead of per charity:

• Donors can give intermediaries the authority to create Gift Aid declarations on their behalf.
• Once authorisation is in place the intermediary can make Gift Aid declarations up to the end of that tax year (or the following tax year if authority is given on or after 1 March) or until the donor cancels the authorisation.

The Donations to Charity (Gift Aid Declarations) Regulations 2016 (SI 1195/2016) introduced these measures and also provides further measures on:

• The form and content of intermediary declarations.
• Record-keeping requirements for intermediaries and charities.
• An annual statement to be provided to donors by intermediaries.
• Penalties for non-compliance of up to £3,000.

Where a donation is made via a digital platform, credit card or debit card payments may incur an administration fee which reduces the amount received by the charity. The gross donation paid is eligible for gift aid, subject to the normal qualifying conditions. The charity may treat the administrative fees as a charitable expenditure.

If a charity is unable to demonstrate a clear audit trail of administration fees incurred, gift aid should only be claimed on the net donation received.

Gift Aid declarations and partnerships

• Up to 5 April 2016, one partner was able to make a Gift Aid declaration on behalf of all the partners in a partnership provided they were given such a power under deed (e.g. in the partnership agreement). The declaration must list all the individual partners’ names and home addresses.
• From 6 April 2016, when a partnership donates Gift Aid each individual partner must make their own Gift Aid declaration, specifying the amount of each partner’s share of the whole donation.

Identifying the gift or gifts

There is no wording set in the legislation, so charities can choose. These are some commonly used descriptions:

• The donation of £[amount] that I make to you on [day/date].
• All donations that I make to you under direct debit commencing on [date].
• All donations I make from this date [date] and until further notice.
• All donations I have made since [date] and all donations I make hereafter.

Gift Aid templates

Our templates:

• Multiple donations.
• Single donation.

HMRC provides the following templates for charities and CASCs:

A single donation Gift Aid declaration

A Gift Aid Declaration template for multiple donations 

A Gift Aid sponsorship and Gift Aid declaration form

Reclaiming Gift Aid tax from HMRC

HMRC has an online repayment service. Form R68(i) has been replaced and there are three repayment options:

Option:	One	Two	Three
File:	Online	Online	By post
Aimed at:	Small charities	Large charities	The digitally excluded; those who are unable to use the internet
Max. no of donors per claim:	1,000	500,000	90 per claim (using a continuation sheet)
How?	Complete a schedule spreadsheet and attach to the HMRC’s online form	Using own Gift Aid database and bespoke commercial software	Use new paper form ChR1 (replaces R68 claim form); HMRC automatically scans your entries
Getting started	Sign up to use HMRC’s Online services and enrol for Charities Online	Either create own APP or buy commercial software. HMRC maintains a list of tested suppliers	Order forms and continuation sheets from HMRC’s Charities helpline

HMRC provides detailed instructions and FAQs about these services, see http://www.hmrc.gov.uk/charities/online/claims.htm

Tax agents may file online for charities provided that they are authorised to act.

Links to get started

Option 1: to sign up for charities online: http://www.hmrc.gov.uk/charities/online/sign-up.htm

Option 2: HMRC’s list of approved software suppliers: http://www.hmrc.gov.uk/efiling/charities/soft_dev.htm

Option 3: HMRC’s Charities Helpline tel: 0300 123 1073, or write to:

Charities, Savings and International 2

HM Revenue and Customs

BX9 1BU

United Kingdom

Include your HMRC reference number when you write, so your enquiry can be dealt with quickly

Compliance points

• Repayment claims must be made within four years of the end of the accounting period or tax year to which they relate.
• The charity is required to list each donor together with the amount of each donation received.
• Charities may be subject to tax penalties for error or mistake under Schedule 24 FA 2007

Since 12 March 2008, charities are able to add together small donations that they receive from multiple donors within certain limits.

The limits are:

• Each individual donation within the aggregated amount must not be more than £20.
• The aggregated amount on each line on the claim cannot exceed £1,000.

For Option 1, charities must follow HMRC’s detailed guidance in completing the online form.

For Option 2, each charity will need to work with its software supplier to ensure that the correct details are returned from its database.

For Option 3, the entries on the repayment schedule must be suitably descriptive to enable the charity or CASC to find the relevant Gift Aid declaration and audit trail information that support the amounts listed on the schedule.

The adding together of small donations cannot be applied to:

• Donations larger than £20.
• Collections where there are no Gift Aid declarations unless a tax refund is claimed under the Gift Aid Small Donations Scheme (GASDS), see GASDS tab.
• Donations associated with admissions to charity visitor attractions
• The arrangements for sponsored events (above).

To claim Gift Aid on aggregated donations, the charity does not need to enter the name and address of individual donors. Instead, the charity must enter: 

• A simple description in the aggregated donations box, for example, 'Thursday club'.
• The date of the last donation.
• The total amount raised.

There is no limit to the number of lines on a claim schedule.

Charities should only add together donations that were made within the same accounting period. 

• Evidence of individual donations should be kept, showing that they qualify for Gift Aid. 
• Charities must keep all records for 6 years from the end of the accounting period they relate to.

Audit by HMRC

HMRC selects charities and CASCs for audit using a risk-based and random selection. The charity's trustees are responsible for ensuring that claims made under Gift Aid are accurate and that sufficient records are retained for audit purposes.

See HMRC: Charity audits

Record-keeping

While reviewing some of its guidance back in 2012 HMRC identified an error. Its guidance stated that the four-year time limit for making claims under Gift Aid also applied to the retention of records. This was incorrect. Records should be kept for at least six years.

HMRC realise that some charities may have relied on the incorrect guidance, and may as a consequence have destroyed records that would now be more than four years old. If this has been the case, HMRC will not penalise those charities.

Small print & links

Pro bono work and professional indemnity insurance

• Advisers should always check their professional indemnity insurance policy wording before undertaking voluntary work.
• Work of a professional nature should be undertaken only if an adviser has commensurate skills and competence.
• Employers should ensure that they have a policy in place to allow employees to undertake pro bono work.

Direct tax references

Gift Aid Relief: Section 413 to 430, Chapter 2, Part 8 Income Tax Act 2007

Donations to charity by individuals (appropriate declarations) regulations 2000/2074

GASDs: Small Charitable Donations Act 2013 and Small Charitable Donations and Childcare Payments Act 2017

The Donations to Charity (Gift Aid Declarations) Regulations 2016 2016/1195

CASC Corporation Tax exemptions: Sections 662 to 665, Chapter 9, Part 13 Corporation Tax Act 2010

External links

HMRC's charities pages: http://www.hmrc.gov.uk/charities

For HMRC's guidance on specific topics see: http://www.hmrc.gov.uk/charities/gift_aid/rules/index.htm

HMRC’s guidance on GASDS post 5 April 2017: https://www.gov.uk/claim-gift-aid/small-donations-scheme

CASCs

HMRC provides a list of registered CASCS here: http://www.hmrc.gov.uk/casc/clubs.htm