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Written by Yedidya Zaiden
As you are no doubt already aware, charity tax relief encompasses various forms of tax advantages available to registered charities.
This includes relief on Income Tax, Corporation Tax, Capital Gains Tax, and Stamp Duty Land Tax.
Charities can claim back 25p for every £1 donated through Gift Aid, enhancing the value of donations at no extra cost to the donor.
To benefit, charities must be recognised by HM Revenue and Customs (HMRC) and comply with specific regulations.
Here’s how to use Gift Aid properly:
What is Gift Aid?
Gift Aid is a tax incentive that allows charities to reclaim an extra 25% on every eligible donation made by a UK taxpayer.
For donations to qualify, donors must have paid at least as much in Income Tax or Capital Gains Tax in that tax year as the charity will claim on their donations.
It’s a powerful tool that can significantly increase your charity’s income.
Implementing effective Gift Aid strategies
We are often asked by charities (especially those who are new to the world of charity taxation) how to maximise their use of Gift Aid.
Claiming Gift Aid: Documentation and processes
The process of claiming Gift Aid requires meticulous record-keeping and adherence to HMRC’s guidelines.
Charities must obtain a valid Gift Aid declaration from donors, which can be in written or verbal form.
Records of each donation and its corresponding declaration must be kept for at least six years.
Claims for Gift Aid can be made using the HMRC Charities Online service, and charities need to ensure they claim within the appropriate time frame, usually within four years of receiving the donation.
Maximising tax efficiencies
To maximise the benefits of Gift Aid, charities should encourage all eligible donors to complete a Gift Aid declaration.
The Gift Aid Small Donations Scheme (GASDS) allows charities to claim Gift Aid on cash or contactless donations up to £30 without a declaration, up to a threshold of £8,000 per year, which can significantly boost a charity’s income.
Gift Aid can also apply to funds raised through charitable events and activities, under specific conditions.
For example, sponsored events where the participant has a sponsorship form filled in by individual sponsors can qualify for Gift Aid.
However, there are limitations, and not all funds raised through events and activities are eligible.
As you can see, whilst there are some hoops to jump through, most charities can take full advantage of the Gift Aid scheme.
Here are some practical tips and tricks for utilising your Gift Aid to the fullest.
If you’d like further information or tailored advice on your use of Gift Aid, we recommend you speak to a qualified and experienced tax adviser who specialises in charities.
We can take a look at your current practices and processes and guide you on the best strategies for using Gift Aid.
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