Presentation on theme: "Gift Aid in Numbers Almost £950 million paid back to charities in 2008/2009 £280 million to higher rate taxpayers in 2008/2009 Still an estimated £742."— Presentation transcript:
Gift Aid in Numbers Almost £950 million paid back to charities in 2008/2009 £280 million to higher rate taxpayers in 2008/2009 Still an estimated £742 million left unclaimed each year. (CAF 2009 & HMRC)
Gift Aid On donations from UK taxpayers (income and capital gains tax) 2010 budget extended Gift Aid to eligible EU, Norwegian and Icelandic charities The charity claims tax paid on donations Donors must complete a declaration – oral or written Both UK and non-UK Charities must be registered with HMRC for tax purposes to claim Gift Aid.
Gift Aid – What’s it worth? Gift Aid is currently worth an extra 25p per £1 donated It is calculated as a percentage of the gross donation - to take home £100, a basic rate taxpayer needs to earn £ at the current 20% basic rate tax The charity claims the £25.00 Transitional Relief of £3.20 increases the value to £
Transitional Relief From 6 th April 2008 until 5 th April 2011, Transitional Relief will be added to Gift Aid claims at a rate of 3 pence per pound Transitional Relief makes up the shortfall in the value of Gift Aid to charities following the 2008 reduction in basic rate tax Transitional Relief is not a tax relief but ‘Government Expenditure’ that will be paid to charities for this limited time Payments received by charities include Gift Aid and Transitional Relief.
Gift Aid and Higher Rate Tax Payers Higher rate taxpayers can reclaim the difference between the higher rate (40%) and basic rate tax (20%) on donations For the 50% tax rate, the reclaim will be the difference between taxpayers’ highest rate (50%) and basic rate (20%) On the SA100 Charity form, donors can give any rebate to one charity of their choice For a charity to benefit from this, they must register separately with HMRC for a SA Donate reference number.
Gift Aid – The Value of Gift Aid * Full potential with Gift Aid and Transitional Relief on the amount reclaimed by the donor and given to the charity. DonationCharity claims Transitional relief Total donation Donor reclaims Full potential Basic rate taxpayer (20%) £100£25.00£3.20£ Higher rate taxpayer (40%) £100£25.00£3.20£128.20£25.00£160.25* Highest rate Taxpayer (50%) £100£25.00£3.20£128.20£37.50£176.27*
Gift Aid – Why? It’s free money! With a donor’s permission you can claim Gift Aid on their donations over the previous four years (previously 6 years before April 2010) Retrospective claims are worth an extra 28.2% too – for a £100 a year gift that’s an extra £ over 4 years Donors want charities to maximise the value of their gift!
Gift Aid – The Rules Donor must pay at least as much income tax or capital gains tax as the charity claims back in Gift Aid from HMRC Both UK and non-UK Charities must be registered with HMRC for tax purposes to claim Gift Aid Gift Aid can only be claimed on gifts of money Donor must complete a Gift Aid declaration Donor ‘thank you’ gifts cannot exceed HMRC’s ‘Donor Benefit Rules’.
Gift Aid – Donor Benefit Rules Donation < £100 – max benefit of 25% of the gift Donation £101 - £1,000 – max benefit of £25 Donation > £1,000 – max benefit of 5% of the gift Donation > £10,000 – max benefit of £500.
Gift Aid – Connected Persons Rule If a donor receives a benefit that exceeds HMRC’s ‘Benefit Rules’, then donations from the donor and individuals connected to that donor may not qualify for Gift Aid This is most common when the donor is taking part in a sponsored event where there are clear benefits such as flights and accommodation Connected people include any linear relative of the donor or their spouse/civil partner.
Gift Aid – Declaration Declarations can be made in writing or orally and must contain: Donor’s first initial, surname, house number and full postcode Name of the charity Details of the gift(s) to which the declaration relates - can also specify if donor wishes to backdate and Gift Aid future donations Confirmation that the donor has paid UK income tax or capital gains tax sufficient to cover the amount that the charity claims.
Gift Aid – Keeping Records Paper Electronic (hard drive, CD-Rom, disc etc) Scanned documents or microfiche Oral declarations can be a recorded phone call or a follow-up letter confirming donor and donation details (and gives the donor a 30 day cool off period) All records must be readily available for an audit.
Gift Aid – The Audit HMRC check to ensure that charities are following the rules Look at accounting records, systems and procedures Charity must produce a sample of donor records that include: records of donations, Gift Aid declarations and bank records The audit may also identify other tax risks – major donors, gifts of shares, gifts of land and property.
Gift Aid – A Clear Audit Trail HMRC will review: Gift Aid declarations Bank statements Donation records – receipts, cash book entries etc Correspondence with the donor may be required.
Gift Aid – Making Claims Determine status – registered charity, exempt or excepted Complete HMRC Charities Application Form to register Receive unique reference number, forms and guidance notes Complete R68(i) (available in electronic and paper format) Payment processed by HMRC.
Gift Aid – Maximising Take Up Newsletter articles Specific or regular mailings Briefing staff and volunteers Envelope collections Sponsor forms Website.
Gift Aid – Budget 2010 Changes Registration process/forms have changed Eligible Non-UK charities can potentially claim Gift Aid on donations from UK taxpayers Time limits for retrospective claims reduced from 6 to 4 years Highest rate of tax (50%) could allow donors to reclaim more HMRC consulting with the sector to change how often charities can claim Gift Aid and minimum claim amount.
Getting Help For one-to-one advice about how to increase your income through tax-effective giving, contact the Institute of Fundraising’s Tax- Effective Giving team: Tax-Effective Giving Helpline: Website: Gift Aid Forum: