How Charities Claim Gift Aid

# How Charities Claim Gift Aid

Gift Aid allows charities and community amateur sports clubs (CASCs) to claim back 25p for every £1 donated by UK taxpayers, significantly boosting the value of donations. To claim, you must be recognised by HMRC for tax purposes, obtain Gift Aid declarations from donors, and follow specific rules about which donations qualify.

How Gift Aid works

When an individual makes a donation to your charity or CASC, you can claim back 25p for every £1 they give. This reclaims the basic rate tax (20%) that the donor has already paid on their income.

For example, if someone donates £100, you can claim an additional £25 from HMRC, making the total value of the donation £125 to your organisation.

Who can claim Gift Aid

You must be recognised as a charity or CASC for tax purposes by HMRC before you can claim Gift Aid. You can only claim on donations received after the date HMRC accepts your organisation.

What donors need to do

The donor must have paid at least as much in Income Tax or Capital Gains Tax in that tax year as you want to claim in Gift Aid. They need to understand they are responsible for paying any difference if the tax claimed exceeds what they've paid.

The donor must also make a Gift Aid declaration giving you permission to claim. Without this declaration, you cannot claim Gift Aid on their donation (though there's an exception for small cash donations explained below).

Obtaining Gift Aid declarations

A Gift Aid declaration can be made in writing, verbally, or online. Whichever format you use, the declaration must include:

• The name of your charity or CASC
• The donor's full name
• The donor's full home address including postcode
• Whether the declaration covers past, present, or future donations, or just a single donation
• A statement that the donor wants Gift Aid to apply
• An explanation that the donor must pay sufficient UK Income Tax and/or Capital Gains Tax

HMRC provides free template declaration forms for one-off donations, multiple donations, and sponsored events that meet all requirements.

Verbal declarations

Donors can provide declarations verbally, such as over the phone. You must send or give donors written confirmation of a verbal declaration within 30 days, and donors have 30 days from receiving this confirmation to cancel.

Record keeping

You must keep records of all Gift Aid declarations for 6 years after the most recent donation you claimed Gift Aid on. If a declaration covers regular donations (such as a direct debit), keep it permanently until the donor stops giving, then apply the 6-year rule from the date of the final donation.

You can scan paper declarations and store them electronically, then destroy the originals, as long as you can view and print the scanned images when needed.

What donations qualify for Gift Aid

You can claim Gift Aid on donations from individuals who are UK taxpayers. Donations must be genuine gifts, not payments for goods or services.

Special situations where you can claim

Gift Aid can be claimed in these specific circumstances:

Sponsored challenges: You can claim Gift Aid on sponsorship raised by participants in events like marathons or overseas treks, but only if participants pay the full cost of flights and accommodation themselves. The deposit or registration fee does not qualify for Gift Aid.

Charity membership fees: Subscription payments qualify only if they're for membership alone and don't give members personal use of facilities or services. Members can still receive newsletters, visit to view the charity's work, and participate in activities that form part of your objectives.

Selling donated goods: Charity shops can operate a retail Gift Aid scheme where donors appoint the shop as their agent to sell goods on their behalf, then donate the proceeds to the charity.

Church collections: You can claim Gift Aid on collections that form part of the church's own income, but not on collections for another charity unless the church sets up a specific fund.

What you cannot claim on

Gift Aid does not apply to:

• Donations from limited companies
• Donations made through Payroll Giving
• Payments for goods or services
• Donations of shares
• Charity vouchers (such as CAF vouchers)
• CASC membership fees
• Donations received before HMRC recognised your organisation

The benefit rule

When someone makes a donation, you can give them something in return as a thank you, known as a 'benefit'. However, if the value of this benefit is too high, the donation won't qualify for Gift Aid.

You can claim Gift Aid if the benefit value doesn't exceed these limits:

• Donations up to £100: benefit can be worth up to 25% of the donation
• Donations of £101 or more: benefit can be worth up to £25 plus 5% of the amount over £100, with a maximum total benefit value of £2,500

The value of a benefit is what it's worth to the recipient (usually the retail value), not what it costs your charity. Newsletters and simple plaques thanking donors don't count as benefits.

The Gift Aid Small Donations Scheme

You can claim 25% on cash donations of £30 or less and contactless card donations of £30 or less (collected on or after 6 April 2019) without needing a Gift Aid declaration. This is called the Gift Aid Small Donations Scheme (GASDS).

You can claim up to £2,000 per tax year through GASDS (£1,250 for years before 6 April 2016).

Eligibility requirements

Your charity or CASC must have:

• Claimed Gift Aid in the same tax year you want to claim GASDS
• Claimed Gift Aid without getting a penalty in the last 2 tax years
• Claimed Gift Aid in at least 2 of the last 4 tax years (for donations made before 6 April 2017)

Your GASDS claim cannot be more than 10 times your Gift Aid claim. For example, if you've received £100 of Gift Aid donations, you can claim on up to £1,000 through GASDS in the same tax year.

Community buildings

If your charity has a community building (such as a village hall or religious building) where you've hosted at least 6 charity events attended by at least 10 people, you may be able to claim more on donations collected in that building or in the same council area (for collections on or after 6 April 2017).

Record keeping for GASDS

You must record:

• Total cash donations collected
• Date of collection
• Date paid into a bank account
• Receipts from card machines for contactless donations

For collections in community buildings, also record the address (including postcode), type of event, number of events held, estimated attendance, and when donations were collected.

How to claim

You can claim Gift Aid and GASDS online. You should receive payment within 5 weeks of making your claim.

Sources

• Claiming Gift Aid as a charity or CASC
• Gift Aid declarations: claiming tax back on donations
• Gift Aid donation claims for charities and CASCs

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.