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Gift Aid

Gift Aid for charities

What is Gift Aid? Gift Aid is a simple way for you to increase the value of gifts of money from UK tax payers.
Benefits: By asking donors for permission to reclaim the tax that they have paid on their donation, you can increase the value of donations to your charity by one quarter. From 6 April 2008 the basic rate of Income Tax is 20 per cent. This means that for every £1 qualifying donation received, your charity can claim repayment of 25 pence.

HMRC logoHMRC logoHow does Gift Aid work? When a UK taxpayer gives a gift of money to a charity, they have already paid tax on that money. Because charities are generally exempt from tax, they can claim an amount from HM Revenue & Customs (HMRC) equal to the tax paid on that money by the donor. This repayment from HMRC is known as Gift Aid.
Resources: Charities and social enterprises with charitable purposes applying for tax exemption status should use a CHA1 form from HMRC’s website.

For Community and Amateur Sports Clubs and similar there is a CASC(A1) form to use to register with HMRC which you can download from HMRCs website

HMRC's helpsheet

Gift Aid Declarations
Before your charity or CASC can claim gift aid back on a donation from an individual you must obtain a Gift Aid Declaration from that individual donor.

Regulations for the Gift Aid Small Donations Scheme
GASDS is a new scheme that means that charities and Community Amateur Sports Clubs (CASCs) can claim a top-up payment on cash donations of £20 or less without the need to collect Gift Aid declarations. Charities will generally be able to claim on small donations of up to £5,000 per year. Claiming for £5,000 of small donations will result in a repayment of £1,250 for the charity or CASC.
The GASDS is ideal for small cash donations received in collection boxes, bucket collections and during religious services. Charities and CASCs wishing to claim under GASDS will still need to make Gift Aid claims in respect of other donations for which they have a Gift Aid declaration in the same tax year, for example, on regular donations received from supporters. This is called the 'matching rule': every £10 of donations claimed under GASDS must be matched with £1 of donations claimed under Gift Aid in the same tax year.

Payments under this scheme must be claimed using the Charities Online service, through either, the online form, the database option or the ChR1 paper claim form. Draft regulations under the Small Charitable Donations Bill setting out the general administrative framework for the Gift Aid Small Donations Scheme.

Gift Aid regulations on goods being sold by a charity
There are very detailed and complex rules regarding when the charity can claim Gift Aid. It has to be that the charity is selling the goods on behalf of the donor. The donation is at the point that the donor agrees not to receive the proceeds of sale. This must be after the sale of the goods and when the amount of proceeds is known, the donor agreeing to donate it to the charity at that point. There must be a signed Gift Aid declaration in place.

Charity auctions
A payment to your charity will only qualify for Gift Aid if it is a voluntary donation. Where an individual successfully bids for goods or services at a charity auction, their payment for the item is not a donation and therefore not strictly a gift to charity.

However HM Revenue & Customs (HMRC) recognises that sometimes payments made for goods and services auctioned for charity will intentionally be more than their retail value. In these circumstances HMRC will treat payments as donations which will qualify for Gift Aid provided that the other rules of the scheme are met and the benefits don't exceed the limits. Visit HMRC’s website for advice regarding Gift Aid on:

  • Value of benefits allowed
  • Working out the value of the benefit
  • Buying the benefit
  • Why many charity auction donations don't qualify for Gift Aid
  • VAT and charity auctions
  • Contacting the HMRC Charities Helpline
  • More useful links