SECTION 1
WHAT IS GIFT AID?
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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What is Gift Aid? Gift Aid allows churches to reclaim the basic rate of tax on donations received from UK taxpayers from HM Revenue & Customs (HMRC). Gift Aid is a great way to boost income to your church by maximising the value of donations at no extra cost to the donor and with minimal administration. It is an extremely effective and flexible way to give. As long as the donor is a UK taxpayer, all he or she has to do is give you a simple Gift Aid Declaration. A single Gift Aid Declaration can cover any number of donations from that donor, applying to future donations and to donations received over the past four years. Imagine what a difference this could make to your church. Your donors are much more likely to use Gift Aid if you ask them directly and if they understand the difference it could make in real terms: what the extra Gift Aid money will enable your church to do. To increase general awareness and take-up of Gift Aid:
Give examples of what extra Gift Aid money could enable your church to do Explain about Gift Aid each time donors are asked to give Include a Gift Aid Declaration in your annual thank you letter to donors Make the point that small amounts donated and reclaimed can also add up to serious money
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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Eligibility The donor must pay enough income tax and / or capital gains tax in the same tax year to at least equal the amount of tax that your church will reclaim from HM Revenue & Customs on his or her donations. For example, if a donor gives you £100 in a tax year, he or she must pay at least £25 in tax (the same amount that you will reclaim). It does not matter at what rate the donor pays tax and it could be tax deducted from bank or building society interest or the tax credit on dividends. £ Donor gives to church Church reclaims from HMRC £25 at the basic rate of income tax, plus £3.20 transitional relief (currently until 5 April 2011) Total received by church
100.00 28.20 128.20
Higher rate taxpayers If donors pay tax at higher rates of income tax, they can also claim tax relief for themselves at the difference between the basic rate and the higher rate of income tax. If the donor completes a tax return, the tax relief can be claimed by entering the donation in the Gift Aid section of his or her tax return. Some donors may receive a Tax Review Form (P180) on which they can make a claim. Otherwise the donor can get in touch with the tax office that handles his or her affairs. £ Donor gives to church Church reclaims from HMRC £25 at the basic rate of income tax, plus £3.20 transitional relief (currently until 5 April 2011) Total received by church
100.00 28.20 128.20
Tax reclaimed by the donor £25 at the difference between the basic rate and the higher rate
25.00
Cost to the donor of his / her donation (£100 minus the £25 tax reclaimed)
75.00
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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Five Easy Steps to Gift Aid 1. 2. 3. 4. 5.
Request a registration pack and reference number from HM Revenue & Customs Get a Gift Aid Declaration from your donors Keep a record of the Declarations, either electronically or on paper Claim the tax back from HMRC on a regular basis Tell your donors about Gift Aid, an easy way for them to increase their donations at no cost to themselves
Gift Aid Declarations Donors are required to give you a Declaration:
In advance of their donation, at the time of their donation, or at any time after their donation (subject to the four-year time limit within which you can reclaim tax) To cover a single donation or any number of donations In writing (e.g. by post, by fax, by text message, by email or electronically through the Internet) or orally (e.g. face to face or over the phone)
You may want to design your own Gift Aid Declaration, but you should ensure that it satisfies all the requirements set out below. There is no need to get HMRC's approval for your owndesign Declaration. What a Gift Aid Declaration must contain
The donor’s name The donor’s address The church’s name (including any acronyms eg PCC) A description of the donations to which the Declaration relates A Declaration that the donations are to be treated as Gift Aid donations A note explaining the requirement that the donor must pay an amount of income tax / capital gains tax equal to the tax deducted from his / her donations The date of Declaration
A signature is not required by HMRC, however Blackburn Diocese recommends that a signature is requested with the Declaration You can pre-print the information on the Declaration form if you wish. For example, you may wish to pre-print the church's name. For oral Declarations, you can either keep a recording of the telephone call or a copy of the written confirmation of the Declaration to the donor. If you choose to keep a recording, you must ensure that the donor confirms the Declaration by letter or by form. Guidance can be obtained from HMRC on what constitutes a suitable script.
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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The donor's name and address In order to ensure that you can establish an audit trail to the donor from a donation, you should get as full details of the name and address as possible - including postcode. In the event that HMRC audits your tax reclaim and the information you hold is insufficient to enable the auditor to trace the donor, you may have to get further information to show that your tax reclaim is correct. If a donor subsequently changes his or her name or address, this will not invalidate the Declaration. If you are notified of a change in the donor’s name or address, you must keep a record of the updated information. Description of the donations to which a Declaration relates You can use any description you like. It might say something like one of the following:
The donation of £x I made to you on dd/mm/yyyy, or The enclosed donation, or All donations I make under the direct debit mandate below, or All donations I make on or after the date of this Declaration, or All donations I make from this date until further notice All donations I have made over the last four years and all donations I make hereafter
It is important that you get the description right – the Declaration will not cover any donations you receive that fall outside the description used. Depending on the description used, the Declaration can cover singular, regular or periodic donations. Gift Aid can be backdated for donations made in the past four years. One Declaration can cover all the donations made to your church in that period. It can also be open-ended to cover all donations to be made in the future. However as a matter of good practice you might wish to remind your donors periodically that they have opted to treat their donations as Gift Aid donations, in case their circumstances have changed and they no longer pay income tax or capital gains tax equal to the tax deducted from their donations. If it turns out that a donor has not paid enough tax to cover the tax the church has reclaimed in one tax year, HMRC has the right to ask the donor to pay back the money. However, you will usually be able to discuss this with HMRC to see whether anything can be arranged on the donor’s behalf and you may be able to correct any mistake made and resubmit your claim. If a donor wishes to alter the description of the donations to which a Declaration relates, he or she should cancel the Declaration and make a fresh one.
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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Declaration that donations are to be treated as Gift Aid donations. Again, you can choose your own wording. You might say something like:
Please treat my donations as Gift Aid donations, or I want my donations to be Gift Aid donations, or Please reclaim tax on my donations, or I want the church to reclaim tax on my donations, or I want the church to reclaim tax on my donations Yes / No Please tick the box if you want the church to reclaim tax on your donations
Note explaining the tax requirement Again, you can choose your own wording. You might say something like:
You must pay an amount of income tax / capital gains tax equal to the tax the church will reclaim on your donations, or Remember to notify the Gift Aid Officer / Treasurer if you no longer pay an amount of income tax / capital gains tax equal to the tax the church reclaims on your donations
Cancellation of Declarations Donors are entitled to notify you of the cancellation of their Declaration at any time. You do not have to wait for the 30 day period to expire before reclaiming tax in respect of donations you have received - but if you reclaim tax and the donor subsequently cancels his or her Declaration within the 30 day period, you must pay the tax back to HMRC. It may be possible for you to pay the tax back to HMRC by deducting it from your next tax reclaim. You should contact them if you wish to do this. If a donor cancels a written Declaration, the cancellation will have effect only in relation to donations received by you on or after the date on which the donor notifies you of the cancellation, or such later date as the donor may specify. You must not reclaim tax in respect of such donations. Any donations received by you before the relevant date will still be Gift Aid donations.
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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Frequently asked questions Q. What about special church funds? Donations made for purposes other than the General Fund can also qualify for Gift Aid. For example, someone may give a donation to the Flower Fund. If that person also has a Gift Aid Declaration to cover all his or her giving, then this donation can be included in any claim. However, because the donation was restricted, the tax reclaimed relating to the donation is also restricted, and should be added to the Flower Fund when the tax refund is received. Q. Can joint donations be accepted? Yes, if a donation is received from a joint bank account and you have a Gift Aid Declaration from only one account holder, you can assume that it is from the account holder who has made the Declaration, unless the evidence clearly suggests otherwise. Q. Can Gift Aid be claimed on donations made by charity cards, cheques or vouchers? No, donations made by charity card, charity cheque or charity voucher have already had Gift Aid claimed and added to the donor’s account. You cannot include them in your claims. Contact the company which issued the card, cheque or voucher for information on how to redeem the donation. Q. Can Gift Aid be claimed on items sold? No, Gift Aid cannot be used for payments to buy goods such as cards or items from a charity shop. There are some trial schemes in place that allow Gift Aid to be reclaimed on items donated to charity shops by eligible donors. Q. What about lotteries and raffles? Buying a ticket for a club draw, lottery or raffle is a payment for the right to enter and take part in the competition, regardless of who wins or the value of the prize. It is not a donation so Gift Aid cannot be used. Q. Is foreign currency eligible for Gift Aid? Yes, you can Gift Aid a donation of foreign currency. The donor and the church will need to record the value in sterling on the date it is given. Q. Can church school costs be Gift Aided? No, Gift Aid cannot be used for the payment of services such as admission to events or school fees. However, the parent teacher association can use Gift Aid when asking for donations towards general school funds.
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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Q. What about charity auctions? In a few cases the money bid for a charity auction can be increased through Gift Aid. This is only when the item has a clear market value, which must be stated at the time of the auction. For an item that is commercially available, the benefit for Gift Aid purposes is the 'shop sale' price of the item. An item must have a clear and recognisable value (market value) and be available for purchase separately by an individual. For a commercially available item that has had its value enhanced, for example because it has been owned by a celebrity, the market value (and hence the benefit for Gift Aid purposes) will not be the original price of the item but the amount it fetches in the auction. For an item not commercially available, its value is the auction price paid by the purchaser. So the benefit for Gift Aid purposes is the 'auction' price paid. Where the value of the benefits exceed the limits in the donor benefit rules, the donor can treat part of his / her payment as buying the benefits and part (the excess) as a donation. A Gift Aid benefit can only be purchased if the benefit can be purchased separately; and the donor is aware of the value of the benefit at the time he makes his donation. For auction items, this treatment only applies where the item is commercially available; and the donor is aware, at the time he / she makes a successful bid that the item could be purchased separately and for what price. Amount of donation
Benefit value limit
£0 - £100
25% of the donation
£101 - £1,000
£25
Above £1,000 donated up to and including 5 April 2007
2.5% of the donation
Above £10,000 donated up to and including 5 April 2007
£250
Above £1,000 donated on or after 6 April 2007
5% of the donation
Above £10,000 donated on or after 6 April 2007
£500
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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Sponsored (challenge) events Potentially all donations can be Gift Aided as long as donors gave permission when they filled out the sponsor forms. An example form is on page 11. The form should include:
The church’s name The date of the event A reminder about the benefits of Gift Aid A note explaining the requirement that the donors must pay an amount of income tax / capital gains tax equal to the tax deducted from his or her donations
And for each donor:
Space for the donor’s full name (words like ‘mum’ or ‘Sarah’ are not eligible) Space for the donor’s home address (workplace addresses or email addresses are not eligible) Space for the postcode (this is something people often forget) A note explaining the requirement that the donors must pay an amount of income tax / capital gains tax equal to the tax deducted from his / her donations
It is likely that donations made by the participant and his or her family will not be eligible for Gift Aid because they provide a benefit to the participant, but sponsorship by people unrelated to the participant will usually be eligible. Any registration fee or non-refundable deposit is not eligible for Gift Aid as it is not a voluntary donation.
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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SECTION 2
SAMPLE FORMS
HM Revenue & Customs Charities Telephone: 0845 302 02 03 option 6 Email:
[email protected] Website: www.hmrc.gov.uk/charities Address: St Johns House, Merton Road, Liverpool, L75 1BB
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