Gift aid allows a charity or community amateur sports club to reclaim an extra 25p from HMRC for every £1 donated to them. A declaration is required from the donor that they have already paid tax on the donation and can cover donations made in the past 4 years. The declaration must include the charity name and the donor’s full name and address details.
Gift aid can be claimed when a donation is made by a taxpayer. This includes donations by spouses and civil partners, but excludes donations made by groups of people such as work collections.
Donors can recover the difference between basic rate tax and higher rate / additional rate tax relief through their tax return (or Form P810 where a tax return is not completed).
Gift Aid Small Donations Scheme (GASDS)
Gift Aid can also be claimed in respect of small monetary donations of up to £20 each, provided they are less than £8,000 in total (before 6 April 2016 this was £5,000), under the Gift Aid Small Donations Scheme. This scheme can only be used if Gift Aid has been claimed and the amount claimed under the scheme is less than 10 times the amount claimed under normal Gift Aid.
There is an additional GASDS allowance available for each community building in which collections are made, e.g. a church/ cathedral, village/town hall, mosque or synagogue. The building must be used at least 6 times a year for charitable activities, with at least 10 people benefiting from the charitable activities. It should be open to members of the public.
Payroll Giving Scheme
Businesses can set up and operate a Payroll Giving Scheme to allow for donations to be made to the charity gross. For every £1 given to the charity through the scheme it only costs the employee 80p basic rate/ 60p higher rate/ 55p additional rate. These schemes are operated by a payroll giving Agency who will charge a fee for this.
Donations of Land, Property or Shares to Charity
Individuals can also make donations of land, property or shares to charity. No capital gains tax is paid by individuals on items donated to charity. If the item is sold to the charity at below market value, capital gains tax is only potentially payable if the actual proceeds exceed the original cost. The individual can deduct the value of the gift from their earned income for the year, and provided they are a tax payer, they will also receive income tax relief. The charity can ask the individual to sell the item, donate the cash and the individual can still obtain tax relief provided they keep evidence of the charities request and records of the gift made.
Donations as Part of an Estate
Finally individuals can donate through their will. All donations to charity through a will are deducted from the value of the estate before inheritance tax is calculated. If the donation through a will amounts to more than 10% of the estate and the estate exceeds the inheritance tax threshold then a reduced rate of inheritance tax of 36% (rather than 40%) is payable.
For further information and advice on Gift Aid please contact Di Perrett
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