Making the Most of Gift Aid
Recent research from HMRC has suggested that small charities and some sports clubs are missing out on £600 million in additional funding, with a third of donations failing to add Gift Aid.
Who does Gift Aid apply to?
As well as charities, Community Amateur Sports Clubs (CASCs) can also take advantage of the Gift Aid scheme, meaning that for every £1 donated, the CASC or charity can claim an additional 25p.
The Gift Aid small donations scheme
The Gift Aid small donations scheme (GASDS) allows charities to bypass some of the red tape, with modified rules applying to small donations made after 6 April 2017.
Under the scheme, a charity could potentially benefit from a maximum additional payment of £2,000 per year. It is not necessary to know the identity of donors, or to collect Gift Aid declarations. However, there are still a considerable number of rules relating to record-keeping and banking procedures, and it is important to be aware of these when making a claim.
GASDS can be used for cash donations of £20 or less, or contactless card donations of £20 or less collected on or after 6 April 2017.
There are a number of factors impacting on how much can be claimed, including:
- the amount of eligible small donations received;
- the cap on the amount that can be claimed under GASDS;
- how much Gift Aid has been claimed in the tax year (the ‘matching rule’); and
- whether the charity or CASC is connected to another charity or CASC.
The maximum annual limit on donations is £8,000. The matching rule specifies that the amount of GASDS top-up that can be claimed depends on the amount of Gift Aid donations received and successfully claimed in that tax year. The maximum is the lower of £8,000 or 10 times the total Gift Aid claim. So, if a charity has received £100 in Gift Aid donations, it can claim on £1,000 worth of small donations through GASDS, so £250 in top-up payments. Where a charity has a ‘community building’, slightly different rules apply.
Qualifying for GASDS
To qualify for GASDS, the charity or CASC must have successfully claimed Gift Aid:
- in respect of gifts made to it in the same tax year in which the GASDS claim is being made;
- without having received a penalty in the last two tax years.
For GASDS claims on donations collected before 6 April 2017, additional rules still apply.
GASDS cannot be claimed for donations for which a valid Gift Aid declaration is made, membership fees, or a £20 portion of a larger gift.
Making a claim
Details to record include:
- the amount collected, including denomination of notes;
- date of collection;
- confirmation that no single donation was more than £20;
- where there are contactless donations, records produced by the contactless terminal.
Such records should be preserved for six years from the end of the tax year to which they relate. Note also that the rules require small cash donations to be banked. If donations are used to cover expenses before being banked, the charity or CASC will not be able to claim under GASDS.
This is for general guidance only, and further rules apply, including in relation to community buildings, where charities (but not CASCs) may be able to claim more on donations.
We can advise on the tax rules governing charitable giving. Please contact us for further assistance.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.