Presentation from the workshop session of the Stronger Together Conference 7th July 2015

2. Gift Aid
Mark Proctor
Partner, Lovewell Blake LLP

3. 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

4. Claim process
• Register with HMRC
• Gift aid declaration online or by post
• Can go back four years
• Submit regularly or periodically

5. 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

6. 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!

7. 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

8. 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

9. 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

10. Documentation
• Tax payer must retain supporting
paperwork
• Charity must keep gift aid declarations and
supporting paperwork as may be
inspected by HMRC

11. 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

12. 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

13. 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

14. 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

15. 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 charity

16. 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

17. 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.