Gift Aid

Gift Aid is a UK tax incentive that enables tax-effective giving by individuals to charities in the United Kingdom. Gift Aid was introduced in the Finance Act 1990 for donations given after 1 October 1990, but was originally limited to cash gifts of £600 or more. This threshold was successively reduced in April 2000 when the policy was substantially revised and the minimum donation limit removed entirely. A similar policy applies to charitable donations by companies that are subject to the UK corporation tax.

Gift Aid was originally intended for cash donations only. However since 2006, HMRC compliant systems have been introduced to allow tax on the income earned by charity shops, acting as an agent for a donor, to be reclaimed. In order for the charity to operate effectively they will need HMRC-approved systems to be able to record and track the progress of each item from receipt to sale and confirm with the donor that the donation should still go ahead.[1] In the financial year 2014/5, Gift Aid to charities amounted to £1.19bn.[2]

The Finance Act 2010 extended Gift Aid to charities within EU member states, Norway and Iceland, rather than those just inside the UK.[3] Gift Aid was extended to include Liechtenstein in 2014.

Details

Gift Aid allows individuals who are subject to UK income tax to complete a simple, short declaration that they are a UK taxpayer. Any cash donations that the taxpayer makes to the charity after making a declaration are treated as being made after deduction of income tax at the basic rate (20% in 2011), and the charity can reclaim the basic rate income tax paid on the gift from HMRC. For a basic-rate taxpayer, this adds approximately 25% to the value of any gift made under Gift Aid. Higher-rate taxpayers can claim income tax relief, above and beyond the amount claimed directly by the charities. The rate of the relief for higher-rate taxpayers in 2011 is usually 20%, the difference between the basic rate (20%) and the higher rate (40%) of income tax, although recipients of dividend income (taxed at 10% and 32.5%) can achieve a higher rate of tax relief (22.5%).

Originally, declarations had to be made in writing. Declarations can now be made orally, but the charity must confirm the declaration in writing and keep a copy of the confirmation. If the taxpayer incorrectly makes a declaration, the charity is still able to reclaim the tax that should have been paid on the gift.

Gift Aid can only be reclaimed on money donated by UK taxpayers. Non-UK taxpayers can make donations. However as HMRC is making payment to the charity but there has been no source tax paid by the donor, HMRC has power to collect the equivalent sum from the donor.

The first charity to introduce Gift Aid on donated goods – where the tax is reclaimed on the value of the goods when sold – was Sue Ryder Care.[4]

Gift Aid is only for donations by the donor. It cannot be claimed on other people's donations - for example, if someone collects money from several people, each person would have to make a Gift Aid declaration for their portion. It also cannot be claimed for money where the donor received something in return, e.g. purchasing goods from a charity store, or buying a ticket in a charity raffle, as these are not strictly donations. In the case of donated goods, Gift Aid can still be claimed via the donor of the goods, not the purchaser.

A practical example

Mr Burns donates £100 to charity.

Mr Burns is a higher-rate taxpayer, paying 40% income tax on part of his income. He has made a Gift Aid declaration to the charity. As a result:

  • the £100.00 gift is treated as being made after deduction of basic rate tax at 20%. The gross value of the gift before tax is £125 (£100 / (100%-20%)) – this is the amount of money a basic rate taxpayer would need to earn to receive £100.00 after tax.
  • the charity can claim the 20% of basic rate tax (£125 × 20% = £25) that the taxpayer is treated as having paid on the gross value of the gift. This is effectively an extra 25% on top of the value of the £100.00 donation.
  • because he is a higher-rate taxpayer, Mr Burns can claim back the remaining 20% of income tax which he has paid on the gross value of the gift (the 40% income tax which he paid, less the 20% claimed by the charity). He would make this claim in his tax return. This amounts to a repayment of £25 on the £100 donation (£125 × (40% - 20%)).

The benefits to the charity

For 2008-11 (when the basic rate of income tax was higher than 20%)

£100 donation
£25 refund from HMRC
£3.21 supplement from HMRC
Total to charity = £128.21

After 2011

£100 donation
£25 refund from HMRC
Total to charity = £125

The cost to the donor of the donation

Since 6 April 2008 (higher rate taxpayers only)

£100 donation
less £25 refund from HMRC in due course
Total cost to Mr Burns = £75

This means that for a net donation of £75 from Mr Burns, the charity would receive a benefit of £125.

If Mr Burns paid income tax at the additional rate (45%), the cost to him would be further reduced. He would be entitled to reclaim the remaining 25% of income tax which he paid on the gross value of the gift (the 45% income tax which he paid, less the 20% claimed by the charity). This would amount to a repayment of £31.25 on the £100 donation (£125 × (45% - 20%)). This would mean that for a net donation of £68.75 from Mr Burns, the charity would receive a benefit of £125.

The cost of the donation to a basic rate taxpayer is unaffected, as a basic rate taxpayer cannot reclaim any additional tax.

Revenue to HMRC

Not all monies paid to HMRC during this transaction are refunded.

  • Any National Insurance contributions paid by the employer and employee are not refunded.
  • Although all income tax paid by the higher-rate taxpayer is refunded, the way this is implemented has the effect of making the cost of the donation smaller than the higher-rate taxpayer may have intended as the following example illustrates:
£125.00 total received by charity £125.00 gross income before taxes
less £25.00 the refund from HMRC to the charity less £50.00 higher rate (40%) imposed on giver
equals £100.00 paid to charity equals £75.00 net income received by giver
less £25.00 the refund from HMRC to the giver less £75.00 cost of donation to giver
equals £75.00 cost of donation to giver £0.00 difference kept by HMRC

The giver has only really donated £75 of net income, despite having made a payment of £100.

  • If the charity does not reclaim the tax this money stays with The Treasury.
  • If the giver does not submit a properly completed self-assessment, the refund to the giver stays with The Treasury.

Gift Aid It Campaign

The Gift Aid It logo created by the Giving Campaign
The Gift Aid It logo created by the Giving Campaign

To promote the Gift Aid incentive (amongst other activities), the Government created "The Giving Campaign" in June 2001 [5]. The Giving Campaign was in charge of the "Gift Aid" brand, a brand which is still used to this day despite closing in 2004 [6].

Notes

  1. ^ "Selling goods on behalf of individuals". HM Revenue and Customs. 8 December 2014. Retrieved 16 April 2015.
  2. ^ Total Gift Aid received by charities rose by £140m last year
  3. ^ "The charities' guide to the Finance Act 2010". Sift Media. Retrieved 1 May 2015.
  4. ^ "Sue Ryder Care reclaims £1million extra from the tax man". Sue Ryder Care. 28 August 2007. Archived from the original on 3 November 2009. Retrieved 2009-04-23.
  5. ^ "Campaign Review - The Giving Campaign 2001 - 2004" (PDF). HM Government. 5 May 2004. Retrieved 2 July 2018.
  6. ^ "Giving Campaign Marks its end". Charity Times. 20 May 2004. Retrieved 2 July 2018.

External links

BT MyDonate

BT MyDonate (simply MyDonate) is a not-for-profit online fundraising service provided by United Kingdom telecommunications company BT Group for charities in the UK, and was launched on 6 April 2011 as part of BT's investment to the community. The service passes on 100% of all donations made through the site to the charity, excluding credit/debit card charges and doesn't charge a subscription fee or take commission. The service allows people to register to give money to charity or collect fundraising donations. As of 31 December 2015, BT MyDonate reached over 8,750 charities, making it one of the most popular giving platforms in the UK.On 21 January 2019, BT announced it is closing the service on 30 June 2019 to focus its support in other areas including how they'll continue to support charities, and due to the many alternative fundraising platforms available, including several fee-free offers, to the UK.

BT said: "We’re really proud to have supported charities and fundraisers over many years. It’s been a tough decision to end MyDonate and we’re hugely grateful for the hard work and passion that people show in supporting great causes." It will assist charities affected by the closure and remained committed to investing in community initiatives, including helping people of all ages across the UK to develop essential technology skills and supporting national education programmes such as Barefoot.

Becker College

Becker College is a college in central Massachusetts, United States, with campuses in Worcester and Leicester. Becker College traces its history from the union of two Massachusetts educational institutions—one founded in 1784 and the other in 1887. The college offers more than 40 undergraduate degree programs including nursing programs, a veterinary science program, and video game design and development programs. The college's 2016-17 enrollment was 1,892. Becker College has more than 21,000 alumni.

Charities Aid Foundation

The Charities Aid Foundation (CAF) is a registered UK charity. CAF provides services and assistance to UK and international charities and their donors, and promotes general donation to charities. Its head office is located in the Kings Hill business park, West Malling, Kent with a second office in London on St Bride Street, EC4A 4AD.

Charity Checkout

Charity Checkout is a social business that provides online fundraising tools for charities. The company was formed in 2009 and the company’s headquarters are situated in London.

Charity Commission for England and Wales

The Charity Commission for England and Wales is the non-ministerial government department that regulates registered charities in England and Wales and maintains the Central Register of Charities.

The Charity Commission answers directly to the UK Parliament rather than to Government ministers. It is governed by a board, which is assisted by the Chief Executive (currently Helen Stephenson CBE who succeeded Paula Sussex in July 2017) and an executive team.The current Chair is Tina Stowell, Baroness Stowell of Beeston MBE, who succeeded William Shawcross in 2018.

The commission has four sites in London, Taunton, Liverpool and Newport. Its website lists the latest accounts submitted by charities in England and Wales.

Charity shop

A charity shop, thrift shop or opportunity shop (colloquially referred to as an op shop) is a retail establishment run by a charitable organization to raise money. Charity shops are a type of social enterprise. They sell mainly used goods such as clothing, books, music albums, DVDs, and furniture donated by members of the public, and are often staffed by volunteers. Because the items for sale were obtained for free, and business costs are low, the items can be sold at competitive prices. After costs are paid, all remaining income from the sales is used in accord with the organization's stated charitable purpose. Costs include purchase and/or depreciation of fixtures (clothing racks, bookshelves, counters, etc.), operating costs (maintenance, municipal service fees, electricity, heat, telephone, limited advertising) and the building lease or mortgage.

Community amateur sports club

The Community Amateur Sports Club (CASC) scheme was introduced in 2002 by the then Labour government to support grass roots sport. The original legislation was drafted by Andrew Phillips. It recognises the importance of sport in the community by allowing local amateur sports clubs to register with HM Revenue and Customs (HMRC) as a sports club rather than a business for rates and tax purposes. As such, clubs can benefit from a range of tax reliefs, including Gift Aid and rate relief. Both property and non-property owning clubs can significantly benefit from the scheme.

A community amateur sports club (CASC) in the United Kingdom is an amateur sports club eligible for favourable treatment for taxation purposes, with some similarities to charitable status. The benefits include eligibility for Gift Aid tax relief on donations, relief from at least 80% of business rates, and special treatment for capital gains tax and corporation tax purposes.The main criteria for registration are:

"the club must be open to the whole community"

"the club's main purpose must be to provide facilities for eligible sports, and to encourage people to take part in them"

"the club must be organised on an amateur basis"More than 6,200 clubs, including more than 425 rugby clubs, are registered as CASCs.The Sport and Recreation Alliance (formerly the Central Council for Physical Recreation) maintains an information service cascinfo.co.uk which provides information about the CASC system.

Cybertill

Cybertill is a cloud-based retail software provider, which incorporates point of sale (commonly referred to as EPoS), ecommerce, stock control, CRM, Merchandising and Warehousing modules. Cybertill’s headquarters are in Knowsley, near Liverpool, in the UK. The company is privately owned and funded by Merseyside Investment Fund (MSIF). and employs over 100 people.

Cycling UK

Cycling UK is a brand name of the Cyclists' Touring Club (CTC), which is a charitable membership organisation supporting cyclists and promoting bicycle use. Cycling UK is registered at Companies House (as "Cyclists’ Touring Club"), and covered by company law. It works at a national and local level to lobby for cyclists' needs and wants, provides services to members, and organises local groups for local activism and those interested in recreational cycling. The original Cyclists' Touring Club began in the nineteenth century with a focus on amateur road cycling but these days has a much broader sphere of interest encompassing everyday transport, commuting and many forms of recreational cycling. Prior to April 2016, Cycling UK operated under the brand CTC, the national cycling charity. As of January 2007, the organisation's president was the newsreader Jon Snow.

Goodwood Roller Marathon

Goodwood Roller Marathon is an annual charity race around the historic Goodwood Motor Circuit organised by the Camberley Skaters, currently raising money for the NSPCC. The race is for any "non powered, small wheeled transport" such as Roller Skates (Inline & Quad), Longboards or Roller Skis.

JustGiving

JustGiving is a global online social platform for giving. The firm's headquarters are located in Bankside, London.

Localgiving

Localgiving is a membership network and online fundraising platform dedicated to supporting local charities and community groups in the UK.

Localgiving supports local charitable organisations to diversify their income through online fundraising. It provides tools, training and advice to help local groups connect with supporters online, improve their digital skills and develop practical fundraising experience. It is also an advocate for the local voluntary sector and works to raise awareness and support for local groups from the public, government and businesses. Its online fundraising platform enables supporters to make one-time and regular monthly donations, claim Gift Aid, sponsor fundraisers and stay in touch with their chosen local causes. Localgiving also helps local groups to access new sources of funding by taking part in incentivised giving initiatives such as match fund campaigns and competitions.Localgiving enables charities and community organisations too small to register with the Charity Commission or, in Scotland, the OSCR to benefit from an infrastructure that simplifies the giving process. It also enables them to benefit from Gift Aid on eligible donations through a unique donation journey. Localgiving provides support to small, grassroots aid organisations across the UK.

Matthew Leslie Jenner

Matthew Leslie Jenner is a British entrepreneur. At present he holds positions in 35 companies, including pawn shops and "pay day loan" businesses. He has been involved in a number of companies which operated tax avoidance schemes, which were subsequently overturned by HMRC.

New Mill, Cross in Hand

New Mill is a Grade II listed post mill at Cross in Hand near Heathfield, East Sussex, England. It was the last windmill working commercially by wind in Sussex, ceasing work by wind in 1969 when a stock broke.

Payroll giving

Payroll Giving, Workplace Giving or Give As You Earn (GAYE) is a tax free way for UK taxpayers to give money to UK Registered Charities.

Introduced in 1987, Payroll Giving is a simple, tax efficient scheme which allows employees to give money to the UK registered charity of their choice by having a deduction taken straight from their gross pay. There is no tax for the charity to claim back, as no tax was deducted.

Some companies have put in place a matching gift programme to match or part match their employee donations via Payroll Giving.

Royal Society for the Protection of Birds

The Royal Society for the Protection of Birds (RSPB) is a charitable organisation registered in England and Wales and in Scotland. It was founded in 1889. It works to promote conservation and protection of birds and the wider environment through public awareness campaigns, petitions and through the operation of nature reserves throughout the United Kingdom.The RSPB has over 1,300 employees, 18,000 volunteers and more than a million members (including 195,000 youth members), making it the largest wildlife conservation charity in Europe. The RSPB has many local groups and maintains 200 nature reserves.

The Tim Parry Johnathan Ball Foundation for Peace

The Tim Parry Johnathan Ball Peace Foundation (which changed its name from 'The Tim Parry Johnathan Ball Foundation for Peace' in September 2017) is an educational peace charity based in United Kingdom (charity no.1048990). It was formed in 1995 by Colin and Wendy Parry, following the loss of their 12-year-old son Tim and 3-year-old Johnathan Ball in the 1993 Warrington bomb attacks, which were perpetrated by the Provisional Irish Republican Army.The Foundation raises money through donation, corporate support, sponsoring a participant, support from charitable trusts and foundations, Big Lottery Fund, Gifts in Kind, Gift Aid, In memoriam donations.

Ulster Orchestra

The Ulster Orchestra is a British Orchestra that has been based in Belfast, the only full-time professional orchestra in Northern Ireland. The orchestra plays the majority of its concerts in Belfast's Ulster Hall and Waterfront Hall. It gives concerts across Northern Ireland and the Republic of Ireland, including performances at the Belfast Festival, the Wexford Opera Festival, the Kilkenny Arts Festival, and the National Concert Hall, Dublin. The orchestra currently employs 63 full-time musicians and 17 administrative support staff.

Working Tax Credit

Working Tax Credit (WTC) is a state benefit in the United Kingdom made to people who work and have a low income. It was introduced in April 2003 and is a means-tested benefit. Despite their name, tax credits are not to be confused with tax credits linked to a person's tax bill, because they are used to top-up wages. Unlike most other benefits, it is paid by HM Revenue and Customs (HMRC).

WTC can be claimed by working individuals, childless couples and working families with dependent children. In addition, people may also be entitled to Child Tax Credit (CTC) if they are responsible for any children. WTC and CTC are assessed jointly and families remain eligible for CTC even if where no adult is working or they have too much income to receive WTC.

In 2010 the coalition government announced that the Working Tax Credit would, by 2017, be integrated into and replaced by the new Universal Credit. However implementation of this has been repeatedly delayed and may not be finished until 2022. From 2018 no new claims can be made for Working Tax Credit, only Universal Credit. But existing WTC claimants will not be all transferred to UC until 2022.

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