What is Gift Aid and how do I claim it?

What is Gift Aid?

What is Gift Aid and how do I claim it?

Did you know that you can claim back 25p each time an individual donates £1 to your charity? This is Gift Aid.

Although there are rules on the types of donations you can claim gift aid on, if you are a recognised charity or community amateur sports club (CASC), you can claim online and receive payments within 4-5 weeks.

Your donors must pay at least as much in Income Tax or Capital Gains Tax in that tax year as you want to claim and declare they permit you to claim it.

If you do not have a Gift Aid declaration from your donor, you may still claim cash donations of less than £30 through the Gift Aid small donations scheme (GADSD).

For basic rate taxpayers, gift aid will add 25% of the value of the donation.

Image Credit – CAF (Charities Aid Foundation)

You must keep a record of all Gift Aid declarations for six years after your most recent claim. You can find an example declaration form here.

Only around 25% of donations include Gift Aid although the donor is eligible, mostly due to either a lack of opportunity or understanding of eligibility to include it in their donations.

What are the rules for claiming gift aid?

Sponsored challenges

Does your charity organise fundraising events abroad, such as marathons or trek challenges?

You may be able to claim Gift Aid on participants’ raised sponsorship monies, if the individuals pay the costs for travel and accommodation themselves.

Registration fees or deposits are not eligible for Gift Aid, and where payments are eligible, the sponsors provide a valid declaration.

If you are ‘connected’ to the participant, such as a spouse, relative or company, donations only qualify for Gift Aid if the participant pays the total cost of the trip. This should be borne in mind to ensure that the maximum sponsorship money raised goes to the charity.

HM Revenue & Customs (HMRC) appreciate that your charity or CASC may be unaware of potential connections between participants and their sponsors. However, you must show you have taken reasonable steps to prevent this from occurring, for example, in event literature or sponsorship forms.

Charity membership fees

Charity subscription payments must be for members only and not give any details of an individual’s personal use of the facilities or service.

Your members are still allowed to:

  • Receive your newsletter updates
  • Visit your charity to see the work you do
  • Take part in charity activities that help you meet your charitable objectives

Due to members having personal access to the club facilities or services, CASC’s are unable to claim Gift Aid on membership payments.

Can you claim Gift Aid on gift subscriptions?

Unfortunately, you cannot claim Gift Aid on these as this is a gift to an individual and not to your charity.

Church collections

If your church collects donations for another charity, you cannot claim Gift Aid on this money as the money collected is not seen as the church’s income.

You can claim Gift Aid if your church chooses to set up a fund to raise money for a charity. As the collection forms part of the church’s income, Gift Aid is due.

Charity shops and selling donated goods

If you sell donated goods on behalf of individuals, you can operate a retail Gift Aid scheme. To maximise the amount raised, charities can sell valuable or collectable items donated either via a public auction or online website.

However, the money raised when selling donated items like clothing does not qualify for Gift Aid.

The shop, auction or website that accepts the donated items must inform the owners that they are acting as their ‘agent’ to sell goods on their behalf and that the owner will give the sales proceeds to the charity as a Gift Aid donation.

The owner has the right to keep all proceeds from selling their items or opt to donate all or part of the total amount. You, the staff, or volunteers operating the charity shop, must explain the arrangement and get the donor to complete a form to appoint you as their agent and give a Gift Aid declaration.

There are three ways of operating a Retail Gift Aid scheme, and you can read HMRC’s detailed guidance here.

Charity auctions

If a person buys an item at a charity auction with a retail value that exceeds the benefits limit, you cannot claim Gift Aid.

The donor can choose to split their payment between an amount to ‘buy’ the item and an amount that is a ‘gift’ The value of the auctioned items is subtracted from the amount paid and the remainder must be treated as a donation to qualify for Gift Aid.

You must make sure the value of the item is clear to bidders before they sell.

For rare and unique items, supporters may pay more than its retail price to increase their donation because it is a collectable or valuable item. For example, an original vinyl is more commercially valuable if signed by the artist or band.

Gift Aid benefit depends on the amount that the item fetches in the auction:

DonationMaximum value of benefit
Up to £10025% of the donation
£101+25% of £100 plus 5% of £101 up to the total benefits value (£2,500)

If the donation exceeds the donor benefit rules limit, the donor can ‘buy the benefit.’

Inform the donor of the retail cost of the item and that they can buy the item elsewhere when making their successful bid. The ‘excess donation’ qualifies for Gift Aid . We recommend that donors keep evidence of this arrangement, such as letters exchanged, or details of any information given before the auction.

Charity events

Are you hosting a charity dinner or fundraiser festival?

The tickets you sell to the organised event do not qualify for Gift Aid as the money made from ticket sales counts as a trading profit, not donation.

Only payments that are voluntary donations are eligible for Gift Aid. However, if you set a ticket price for an event and have a suggested donation on top, the donation is eligible.

You must be clear that the suggested donation is optional, and that people can still attend your event without donating. There should be no preference given to ticket holders donating to those who do not.

If you are hosting a donation only event, where people can attend and decide how much they wish to give (if at all!), all donations will qualify for Gift Aid.

The pandemic has resulted in many charity events getting cancelled. Rather than accepting refunds for the ticket value, customers have donated the equivalent sum to the charity. Under pre-COVID-19 rules, charities either missed Gift Aid or would have had to physically refund the ticket price and receive the equivalent amount as a donation. Thankfully, HMRC changed its approach, confirming that Gift Aid is now applicable on all donations equal to the ticket price for events cancelled due to COVID-19.

Initially a temporary measure, HMRC has confirmed this change is now permanent.

Volunteer expenses

If your volunteers incur reasonable expenses for any work they do for your charity, such as train fares, you can reimburse them.

Once you have reimbursed the volunteer, they can choose to keep the money or pay part back to the charity as a Gift Aid payment. Gift Aid will only apply when volunteers make an actual payment to your charity or CASC.

If the expenses you pay a volunteer are more than the costs incurred, the payment is taxable as employment income if they are employed. Otherwise, the costs can be chargeable as a miscellaneous receipt.

Fundraising school charities

Does your charity donate to schools? Or are you involved in running schools or educational trusts?

Only voluntary gifts or payments are eligible for Gift Aid.

For example, you receive ‘voluntary contributions’ from parents or relatives linked to the provision of services or school facilities, these are not charitable donations and Gift Aid is not claimable.

Other payments that are not eligible for Gift Aid:

  • Tuition fees
  • School holidays and educations trips
  • Extra-curricular activities or lessons
  • Tickets for school productions

However, donations made to an appeal or charitable purpose may be eligible.

Usually, donations for the following will qualify for Gift Aid, if they are not linked to any provision of service or benefit to the students:

  • Non-uniform days
  • Sponsored events
  • Building or equipment appeals

There are times when you cannot claim Gift Aid on donations, including the following circumstances:

  • Donations from limited companies
  • Donations in the form of shares
  • Donations made through payroll giving
  • Donations that are payments for goods or services
  • Membership fees to CASCs (Community Amateur Sports Club)
  • Amounts received before you were a recognised CASC or charity
  • Where donors receive a ‘benefit’ over
DonationThe maximum value of benefit
Up to £10025% of the donation
£101 +25% of £100 plus 5% of £101 up to the total benefit value of £2,500

The value of the benefit is usually the retail value of the item or service. It is the value to the recipient, not to the charity.

How do I claim Gift Aid?

Gift Aid is claimed online from HMRC through a spreadsheet, eligible software or via post via Form ChR1.

If you are claiming on over 1,000 donations, you must use the software.

There are deadlines for claiming Gift Aid which depend on how you have set up your charity. You must claim within four years of the end of the “financial period” you received your donation in

  • If you are a trust; this is the tax year (6 April – 5 April)
  • If your charity is a CASC, a CIO (Charitable Incorporated Organisation) or a limited company, this is your accounting period

For cash donations, you must claim within two years of the tax year-end in which you collected the donations.

You will need to keep records of these donations for two more years after the end of the relevant financial period.

Gift Aid is a tax-efficient way of making gifts and donations to UK (United Kingdom) registered charities and community amateur sports clubs. If you have recently set up a charity or CASC and would like further advice on the rules, speak with our advisors.

How can we help?

Wilder Coe has experience preparing and submitting gift aid claims on behalf of charities. We can help assess whether donations are eligible for gift aid and ensure accurate paperwork for gift aid declarations are in place.

Speak to Charlotte Willmore and our charity team for a free consultation.