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Gift Aid in Numbers

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)

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Gift Aid in Numbers

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  1. 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)

  2. 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.

  3. 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 £125.00 at the current 20% basic rate tax • The charity claims the £25.00 • Transitional Relief of £3.20 increases the value to £128.20.

  4. Transitional Relief • From 6th April 2008 until 5th 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.

  5. 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.

  6. 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.

  7. 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 £112.80 over 4 years • Donors want charities to maximise the value of their gift!

  8. 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’.

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. 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.

  15. 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.

  16. Gift Aid – Maximising Take Up • Newsletter articles • Specific or regular mailings • Briefing staff and volunteers • Envelope collections • Sponsor forms • Website.

  17. 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.

  18. 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: 0845 458 4586 Email: taxback@institute-of-fundraising.org.uk Website: www.tax-effectivegiving.org.uk Gift Aid Forum: www.giftaidhelp.org

  19. Useful Websites www.tax-effectivegiving.org.uk www.giftaidhelp.org www.institute-of-fundraising.org.uk www.direct.gov.uk/giftaid www.hmrc.gov.uk/charities (0845 302 0203) www.payrollgivingcentre.org.uk www.rememberacharity.org.uk www.charity-commission.gov.uk

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