fundraising tools and tips - lovewell blake gift aid mark proctor
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Gift Aid
Mark Proctor
Partner, Lovewell Blake LLP
What is gift aid?• Available to charities and community
amateur sports clubs (CASCs)• Claim an extra 25p for every £1 donated• Additional tax relief for higher rate tax
payers• Administered by HMRC
Claim process• Register with HMRC• Gift aid declaration online or by post• Can go back four years• Submit regularly or periodically
Requirements• Donations from individual UK tax payer• Must complete a declaration (refer to
hand-outs)• Donor must state that they have paid
enough tax to cover gift aid – either income or capital gains tax
Higher rate tax payers• Higher rate tax payers can reclaim tax
between the higher rate and basic rate (typically 40% - 20%)
• Donation of £1,000 – charity reclaims £250• Higher rate tax payer reclaims £250
(£1,000 x 25% = £1,250 gift aid donation x 20% tax relief = £250)
• Attractive to higher rate tax payers!
Cost of donation• A £1 donation under gift aid requires a
donation of:– 80p for a basic rate tax payer– 60p for a higher rate tax payer– 55p for an additional rate tax payer
• Important to work with donors to boost donation received by the charity
Other donations• Tax payers can get income/capital gains tax
relief when donating land, property or shares• Income tax relief by deducting the value of
the gift from total taxable income• No capital gains tax on assets gifted to charity
(proceeds below market value)• Charity may request property/shares are sold
before donating – tax relief still applies
Legacies• A Will could gift a fixed amount, an item or
a residuary balance of the estate• Reduces the value of the estate before
inheritance tax (IHT) is calculated• Reduces the rate of IHT if the donation is
more than 10% of estate value
Documentation• Tax payer must retain supporting
paperwork• Charity must keep gift aid declarations and
supporting paperwork as may be inspected by HMRC
Small donations scheme• Available for small donations up to £20, no
gift aid declaration required• Annual claim limit of £1,250.• But not available to all – have to meet
certain requirements: have to be claiming gift aid in the same year; claimed in at least 2 out of 4 years; and had a clean record
Special rules• There are special rules for:
– Sponsored challenges e.g. marathon– Membership fees– Church collections– Selling goods e.g. donated items via charity
shop– Charity events– Viewing charity property– Charity auctions
Charity events• Sale of tickets to an event e.g. concert or
fundraising dinner, do not qualify for gift aid• Does not matter if the cost of a ticket is
higher than the cost of the event; that just equals profit from an event not a donation
• Can be overcome by setting a ticket price with a suggested donation under gift aid
• Or a ‘donation only’ event
Charity auctions• Difficult to obtain gift aid on auctioned
items• Need to declare cost of item and can then
claim on donation in excess of the cost• Does not work for items not commercially
available as effectively the price is set by the auction price
The benefit rule• Donor may receive something in return of their
donation (item or service)• Does not include literature – newsletter, plaque• Value is based on the value to the donor not cost to
the charityDonation Maximum value of benefitUp to £100 25% of the donation
£101 - £1,000 £25
£1,001 and over 5% of donation (up to £2,500)
Trading subsidiaries• Charities can have trading income via a
trading subsidiary e.g. retail of purchased goods, contracting services, or other activities outside of primary purpose
• Trading subsidiary can gift aid profits back to the charity to avoid paying corporation tax
Summary• Use gift aid to increase donated income• Work with donors – higher rate taxpayers,
legacies• Seek advice/read guidance where special
rules apply or benefits are returned to the donor in relation to a gift.