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HM Revenue & Customs (HMRC) pay around £1 billion a year to charities and other qualifying bodies through Gift Aid.

This introductory guide is not intended to comprise exhaustive coverage of the subject; reference should be made to the legislation for all technical and practical questions.

At a glance

At a glance

What's new?

Budget 2018 proposed that Secondary legislation will be published which will increase the Gift Aid Small Donations Scheme individual donations limit from £20 to £30 from 6 April 2019. This is so it aligns with the contactless card payment limit.

Legislation has been included in Finance Act 2019 which introduces new, simplified restrictions to associated benefits that donors can receive.

From 6 April 2019, the proposed benefits allowed are:

Finance Act 2019 also includes the following changes from April 2019:

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

 

What is Gift Aid?

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

Under Gift Aid, a charity may claim a tax refund when it receives a donation payment from a tax payer who is an individual.

How Gift Aid works

Tax relief for the charity

For example:

If an individual taxpayer makes a donation of £100, the charity can reclaim an additional £25 (£100 x 20/80)

Tax relief for the donor

For example:

An individual taxpayer makes a donation of £100, 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, £31.50 (45%-20% x £125) can be reclaimed giving a net donation of £68.50.

What form of donation qualifies for Gift Aid?

Getting started: Gift Aid

To operate Gift Aid, a charity is required to:

To claim a tax repayment a charity is required to:

Gift Aid Small Donations Scheme (GASDS)

From 6 April 2013, the Small Charities Donations Act 2012 allows charities to claim a new Gift Aid style tax refund on up to £5,000 per year of small cash donations received from individuals which are not covered by Gift Aid declarations. This rose to £8,000 on 6 April 2016.

From 6 April 2017, charities with 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 buildings basis.

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

How GASDS works

For example:

If an individual taxpayer makes a cash donation of £20 to a charities street collection tin. The charity reclaims £5 (£20 x 20/80) from HMRC.

GASDS: tax relief for the donor

Getting started: GASDS

To claim a top-up payment on small donations under GASDS, a charity must:

The first of these requirements is to be removed from 6 April 2017 following consultation.
 

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 section.

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


Companies and Gift Aid

Overview

Overview

Donations that qualify for Gift Aid

A donation will qualify for Gift Aid relief providing that:

  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.

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:

Gift Aid can apply to payments made of:

Gift Aid does not apply to:

 Benefits

Defining benefits

A benefit is treated as being associated with a gift if the donor or a person connected to him 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 on the basis of the result of a benefit value test.

Benefit Value Tests

Per gift:

The value of a benefit deriving from a gift is calculated as follows:

Amount of donation

Benefit value limit

£0 -£100

25% of the gift

£101 - £1,000

£25

Above £1,000

5% (prior to 5 April 2007 - 2.5%) of the gift

Above £10,000

£2,500 (from 6 April 2011)
£500 (from 6 April 2007)
£250 (before 5 April 2007)
subject to the rule that the benefit must not exceed 5% of the gift

For example:

Jill is a member of a Ambridge Tennis Club, a Community Amateur Sports Club (CASC). If she makes a donation of £10 to the club it will qualify for Gift Aid provided that she is a taxpayer and she receives no benefit or a benefit that does not exceed £2.50 (25% of £10) from the club in return for her donation.
If the club charges members £3 per session for use of its lawn courts and it wishes to give members like Jill a free session in return for making a donation then the member must donate more than £12 in order to ensure that the 25% benefit test is met.
Alternatively, if Jill agrees to pay separately for her tennis session and then makes a donation the two payments should not be linked and the donation should qualify for Gift Aid, whatever the size.

It follows that advisers should ensure that charities and clubs have a full grasp of the benefits rules to ensure that there is no risk that a benefit and a donation may become linked.

Following Simplifying the Gift Aid Donor Benefit Rules: Response to the Further Consultation the Government announced changes to the rules to be introduced from 6 April 2019:

Donation

Maximum benefit

Up to £100

25% of the donation

Over £100

£20 plus 5% of donation, to a maximum of £2,500

 

Legislation to this effect will be introduced in Finance Bill 2018-19.

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 (£500 up to 6 April 2007).

For example:

Phil makes two donations of £50,000 to his favourite organic farming charity in 2012/13 and in gratitude it gives him holiday vouchers which entitle him to discounts worth £2,500 a piece . 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 less than 12 months.

B. A benefit associated with the gift consists of a right to receive benefits at intervals over a period of less 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, 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 less 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 intervals 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 £300 in that six months and receives a discount of 5% or £15.

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: £15

£30 (£15 x 365 days ÷ 183 days)

The annual equivalent value of the discount of £30 exceeds the small benefit limit of £25 (the limit for donations of between £100 and £1,000): Linda's donation fails the benefit test and cannot qualify as a Gift Aid donation.

Valuation of benefits

Items not quantified as benefits for Gift Aid Condition F

Extra Statutory concessions

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

Gift Aid and Donor Benefits: What’s new?

HMRC opened a consultation, Simplifying the Gift Aid donor benefits rules, following a call for evidence about how and why charities provide benefits, and the use of the extra statutory concessions and admission disregards.

Then initial consultation in February 2016 proposed four simplifications to the current rules. In response to this consultation: 

This consultation closed on 3 February 2017 and HMRC are currently analysing the responses.

For details see above and the consultation response.

Companies and Gift Aid

Charitable companies are able to 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 provided that:

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

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Special cases

Special cases

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

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:

How this works:

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

However, 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:

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, pays a fee to enter or must raise sufficient funds to participate

For further information see Charity events

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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 event are encouraged to obtain sponsorship which is then passed to the charity.

Where the cost is fully funded by the charity

Where the participant pays an entry fee

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: the benefit test is not met.

Where the participant must raise sponsorship to take part

Conversely, if the participation cost of the event is kept entirely separate from sponsorship, Gift Aid relief may be claimed on sponsorship funding. In order to qualify a participant must pay the charity the full advertised cost of the event from his 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 5% of the £2,500 raised, and so none of her £2,500 sponsorship qualifies for Gift Aid.

Alternatively, if Benda 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 as 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.

For example (continuing the example above)

If Brenda had agreed to pay £750 to the charity on her own account, and contributed a further sum made up of donations received from sponsors made up of family members, the total contribution would have to exceed £15,000 in order to pass the benefit test (£750 is 5% of £15,000).

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:

What is a "connected person"

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

HMRC has produced a template sponsorship form.

For further information see Adventure fundraising events

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Schools: special fundraising days

Schools with charitable status may hold special fundraising days in order to raise funds 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 hold the view that as the children are required to make a donation to take part in the fun day, the benefit of the event is the donation and so the benefits value test is not met. However, where a donation is not mandatory, and children are able to participate even when they fail to make a donation then all donations made should potentially qualify for Gift Aid relief.

Where a school holds a special fundraising day for an external charity, it is receiving donations as agent for the charity and has no entitlement to the donations it receives. The charity is able to 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

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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.

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

The rules in this area are also complicated by the fact that different types of school 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 or,
  • Ensure 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, or
  • £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

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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.

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.

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:

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

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

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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:

Benefits and subscriptions

A benefit received as a result of the payment of a subscription, such as:

is not treated by HMRC as a benefit for the purposes of the Benefit Value Test.

A subscription payment which 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:

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

For further information see Membership subscriptions

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Admission fees

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

A right of admission means a right which:

Admission conditions

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

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

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

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, however,

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

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

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Charity auctions

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:

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 unassertainable
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 provides 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 prior to the auction of the commercial value or market price of the item, the bidder may agree to purchase the item at that price. In the event that 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

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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.

In order 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

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Goods: when sold and proceeds gifted

Where a donor donates goods to a charity, goods do not qualify as "payments" for Gift Aid. However 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

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.

Method A

A charity acts as sales agent (as in the ‘Standard Method’). but 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 charity must use the following template letters when writing to the individual:

Method B

Method B is only for use by charities that use a separate entity, such as 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:

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

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

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GASDS

The Gift Aid Small Donations repayment scheme (GASDS)

The Gift Aid Small Donations repayment scheme (GASDS) was introduced by the Small Charitable Donations Act 2012.

What's New?

In Budget 2018 the chancellor has proposed that the GASDS limit is increased from 6 April 2019, to £30 to align with the contactless payment limit.

Following consultation the GASDS rules were simplified from 6 April 2017:

These new rules were introduced as part of the Small Charitable Donations and Childcare Payments Act 2017.

Charities may apply to join new scheme when they have established Gift Aid repayment claims for the last two years, and meet various other conditions. Newly established charities should act immediately to ensure that they do not miss out by failing to register for Gift Aid. Otherwise they may fail to meet the qualifying conditions for the scheme.

Key features of GASDS:

The maximum amount of donations to which the claim relates cannot exceed the lower of:

If the community buildings method is used, then only small donations made in the same Local Authority area as one of the community buildings can be claimed.

Specified amount post 5 April 2017

Example 1

A charity has one community building. During tax year 2017 to 2018 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 2 community buildings. During the 2017 to 2018 tax year it collected £10,500 of small UK donations as follows:

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:

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:

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.

Specified amount pre 6 April 2017

The Specified Amount was £8,000 (£5,000 pre April 2016). This amount is capped where donations are received by connected charities and charities running charitable activities in community buildings, as below.

Under GASDS a charity or Community Amateur Sports Club (CASC) will be able to claim a repayment of up to £2,000 per year on up to £8,000 of qualifying donations (up to £1,250 on up to £5,000 of donations pre April 2016).

Basic example 1:

In 2016/17 Bridge Farm Wetland Trust receives £2,500 in small cash donations from its collecting box. It also receives Gift Aid donations of £3,500. Provided all qualifying conditions are met, the charity claims a GASDS refunds of £625 (£2,500 x 20/80).

Basic example 2:

Upper Loxley Nature Trust receives £2,600 in small cash donations and £120 under Gift Aid. The charity’s maximum donations limit for GASDS is therefore £120 x 10, or if lower £5,000, or if lower £2,600. It is able to claim a GASDS refund of £300 (£120 x 10 x 20/80).

Conditions for GASDS

The charity claimant:

For periods pre 6 April 2017 there were two further conditions to be satisfied:

Conditions for GASDS donations

Donations covered by a Gift Aid donation are outside GASDS and are not included because Gift Aid repayments are available on Gift Aided donations under the normal claim process.

Compliance

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

GASDS: special rules which cap the Specified Amount

The amount that can be claimed under the GASDS is affected by whether a charity is connected with another charity or CASC.

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:

In summary a charitable trust has “control” of another person where:

Control by influence

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

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:

Post 5 April 2017

Pre 6 April 2017

The specified amount for GASDS claims in standard cases was £8,000 (£5,000 pre April 2016). This is capped where charities are:

Connected charities

When charities are connected the specified amount for calculating the maximum GASDS claim is:

This rule is modified in case where charities also run activities from community buildings.

Pre 6 April 2017: Charitable Activities run from Community Buildings (CACBs)

Relief under the GASDS is extended to include cash donations received by charities when running charitable activities in community buildings. This extra GASDS relief does not apply to the activities of community amateur sports clubs (CASCs).

A community building is a building such as a village hall, town hall or place of worship, or part of a commercial building which the public can access, such as a meeting room or office.

A charity “runs” charitable activities in a community building in a tax year if on 6 or more occasions:

“Charitable activity” means an activity carried out for a charitable purpose, other than primarily for the purpose of fund-raising.

In the case of CACBS the specified amount for the maximum GASDS claim is the sum of all small donations received, which comprises:

For example:

A charity runs charitable activities in three village halls and during these events each hall collects £4,000 in small donations from the group attending. The charity also runs street collections during the year and collects small donations of £10,000. Its GASDS claim will be £ 20,000, which is £4,000 + £4,000 + £4,000 (the community building amount for each building) plus £8,000 (the remaining amount of £10,000 is capped by the “if less £8,000).

From 6 April 2017 small donations received outside the community building, but within the local authority area will also qualify for GASDS.

Pre 6 April 2017: Connected charities and community buildings

If one or more connected charities run CACBs in the tax year then the specified amount is capped as follows:

1. If any of the charities do not run CACBS in the tax year, the specified amount in relation to a GASDS claim is an amount equal to:

2. The charity that runs CACBs in the tax year is to be treated as not having made a top-up claim in respect of small donations made in the tax year unless:

The maximum donations limits may not exceed 10 times Gift Aid donations and the connected charities can decide between them which of them will claim for those pooled remaining amounts on behalf of the group.

For example

Three charities A, B and C are connected. Each receives donations under Gift Aid, B and C run CACBs and all receive small cash donations from street collections. The table summarises their options.

 

Donations from CACBs

Small cash donations (remaining amount)

Gift Aid

Limit (10 x Gift Aid)

If all claim remaining amount

If A claims remaining amount

A

£nil

£2,000

£2,500

£25,000

£2,667

£8,000

B

£2,000

£2,500

£300

£3,000

£3,000

£2,000

C

£3,000

£2,000

£5,000

£50,000

£5,667

£3,000

Total

£5,000

£6,500

£9,000

 

£11,334

£13,000

Capped to

 

£8,000

       

Max claim per charity if all claim

 

£ 2,667

       

Pre 6 April 2017: Mergers

Where a charity merges or amalgamates with other charities an application may be made to HMRC who will provide a certificate of compliance for GASDs, this will allow the new charity to take over the compliance history of the old charity and will ensure that GASDs claims may continue without any break.

Due to the change in eligibility rules from 6 April 2017, these merger rules were withdrawn: a charity no longer requires two years of Gift Aid claims.

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Getting Started

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
  • Charities with an income < £5,000
  • CASCs
  • CASCs
  • Charities with an income < £5,000
  • 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.

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:

To complete the form the following details are required:

 Community Amateur Sports Club (CASC)

A CASC may operate Gift Aid on:

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:

The form should be returned to: HMRC Charities, CASC Unit, St Johns House, Merton Road, Liverpool L75 1BB

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:

Benefits to members may include:

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

CASCs and members' bars

Many CASCs run a bar in their club houses. Charities and CASCs are permitted to engage in some low level trading activities and these activities are exempt from tax proving that certain qualifying conditions are met. These are set out in Section 46 Finance Act 2000. In summary:

Providing that a trading activity is permitted by the CASC's or charity's constitution, it is not the club's primary activity and profits must be applied solely for the use of the charity, trading is permitted if the following limits are not exceeded:

Authorising a tax agent

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.

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Compliance

Compliance

Having obtained a registration number from HMRC, a charity is able to reclaim tax from HMRC under Gift Aid.

In order to make a tax repayment claim a charity is required to:

HMRC operates a "check later" approach: a charity claiming a tax repayment under Gift Aid is subject to random checking by HMRC, see:

 Retain and record Gift Aid declarations

The Gift Aid declaration

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

It can be made:

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 charity should explain to the donor that:

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

A written declaration must include:

NEW: Gift Aid Declarations via intermediaries

Finance Act 2015 made changes to ITA 2007 allowing donors to 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.

From 6 April 2017 individuals will be able to make one gift aid declaration per intermediary instead of per charity:

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

New: Gift Aid Declarations and Partnerships

Identifying the gift or gift

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

Gift Aid Templates

Templates: (updated 21/10/15) multiple donations for charities and CASCS

Our templates:

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

Creating your own Gift Aid declarations: HMRC’s checklist

It is not obligatory to use HMRC’s templates. However, HMRC has created two declaration checklists that charities and CASCs may like to use if they decide to create their own for both gifts and sponsorship events:

Reclaiming Gift Aid tax from HMRC

HMRC launched a new online repayment service in April 2013. Form R68(i) has now 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

50,000

90 per claim (using a continuation sheet)

How?

Complete a schedule spreadsheet and attach to the HMRC’s online form

Make up to 1 claim per day directly using own internal database and bespoke commercial software

Use new paper form ChR1 (replaces R68 claim form); HMRC automatically scan's 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: 0845 302 0203, or write to:

HM Revenue & Customs

Charities Correspondence S0708

PO Box 205

Bootle

L69 9AZ

Compliance points

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

The limits are:

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 in order 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:

 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 which would now be more than four years old. If this has been the case, HMRC will not penalise those charities.

For example:

HMRC inspects a charity in 2018/19. HMRC will expect it to have retained records for the previous six years. This means that it should have retained records which date back to 2011/2012. If that charity had relied on HMRC's previous guidance it may have only retained records from 2011/2012.

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Small print & links

Small print & links

Pro bono work and professional indemnity insurance

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

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

CASCs

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

Updates

01/11/18: Budget 2018 announcements

19/07/18 Draft legislation Finance Bill 2019

13/12/17 Results of Consutlation added

07/02/17 Further details added on Gift Aid and intermediaries.

18/01/17 Updated for GASDS reforms receiving Royal Assent

04/01/16 Updated to include publication of SI on intermediaries and refresh links

17/11/2016 add 14/11/16 commencement date to allow intermediaries to give gift aid donations on behalf of individuals.