Gift aid is a valuable incentive available to charities from HMRC. The scheme allows charities to claim an additional 25p for every £1 received on certain donations.
When claiming this additional income stream charities need to ensure that they maintain the correct documentation and are up to speed with the latest legislation on gift aid.
Declarations are required from donors; these can be for a single donation or they can be for all donations made by that person. Declarations are also required on sponsor forms where a donor can elect for gift aid to be claimed. New wording was issued for the declarations in October 2015 which must be used for all donations received by new donors after 6 April 2016. Any existing declarations do not need to be updated. Getting the documentation right is essential as HMRC do conduct compliance checks on gift aid claims.
Recent changes in the taxation of dividends will affect some donors. If the donor has not paid enough tax themselves they may be faced with an additional tax bill to cover the tax reclaimed by the charity.
HMRC have increased the limit on their Small Cash Donations Scheme from 6 April 2016. This allows charities who receive small cash donations below £20 each to claim gift aid on these. The new limit allows for such donations up to a total of £8,000 per tax year to be claimed. This scheme is very useful for church collections or charities who undertake bucket collections. Where charities use a community building they may be able to claim further amounts. This scheme is subject to certain conditions.
There are specific rules on what donations can and can’t be claimed for gift aid. There are also rules around any benefit an individual can enjoy from making a donation. This needs to be a consideration for charities:
where an individual undertakes a sponsored activity on behalf of the charity but part of the funds are to cover the costs of the event
who conduct charity auctions
who have membership subscriptions
who conduct charitable events where an entry fee or ticket charge is made
For charities, gift aid can prove to be an important way of boosting essential income, and in this challenging economic and social environment this additional income can make such a difference to the sustainability of this key sector of the community.
For those who regularly support charities by donating in one form or another, please spare a moment when you fill up a bag with unused clothing, undertake a sponsored event, or simply put a note in a rattling tin – it is worth asking about gift aid as your donation could be worth 25% more to that charity simply by completing a few details.
If you would like more information on anything contained in this article, or would like to have a chat about how our dedicated charities team can work with your charity please contact Paul Colcomb or a member of the charities team by emailing – firstname.lastname@example.org or call us on 01522 531341 – we would be delighted to help you.