There are many considerations when you start a new charity – and Gift Aid is just one of them. It’s important, as it can boost donations and move your finances in the right direction more quickly.
Charity Registration
Only registered charities and Community Amateur Sports Clubs (CASCs) can claim Gift Aid, so ensure you register asap.
Claiming Process
Donors must complete a Gift Aid declaration form. This can be done online, in writing, or verbally, and must include:
The donor’s full name, home address, name of the charity, details of the donation and a statement confirming that the donation is to be treated as Gift Aid.
You will need to register with HM Revenue and Customs (HMRC) before you can claim Gift Aid.
Claims are made through the HMRC online service using the Charities Online service, or by using the ChR1 paper form if claiming less than £1,000.
Records must be kept for six years – digital software is usually best placed to help with this.
Digital Gift Aid
Software such as Gift Aider is a good idea from the start, so that all of your records are organised and the process is smooth and error-free.
Many of our charity clients tell us that the cost of the software is saved in time and resources.
Plus, if you start digital, there’s no changeover from manual or ‘paper’ records to digital.
Calculations
Basic Rate Tax: Charities can reclaim 25p for every £1 donated.
Higher Rate Tax: Donors who pay higher or additional rate tax can claim the difference between the basic rate and their rate on their Self-Assessment tax return.
Types of Donations
Only monetary donations qualify. This includes cash, cheques, direct debits, standing orders, credit/debit card payments, and some types of membership fees.
Donations from companies, payments for goods/services/auction prizes, and donations in return for something other than a token benefit do not qualify. Make sure you know what you can and can’t claim for, depending on the donations you receive and fundraising you hold.
Promotion
Make sure donors know how beneficial Gift Aid is to you, that it doesn’t cost them to do and that higher tax rate payers may also personally benefit.
Provide easy access to declaration forms and remind donors to update them should their tax situation change.
Promotion – Benefits to Donors
Higher rate taxpayers can claim additional tax relief on their donations, which can be beneficial when filing their tax returns.
It’s worth ensuring your donors know this, as it can encourage larger donations.
Promotion – Benefits to Charities
Gift Aid boosts the value of donations by 25%, making it a significant source of additional income.
Regular claim submissions will ensure those donations come into the charity frequently.
Compliance and Reporting
Be prepared for HMRC audits to ensure compliance with Gift Aid regulations and ensure accurate reporting in annual returns, reflecting Gift Aid claims correctly.
You can find more in-depth information on Gov.UK
https://www.gov.uk/government/publications/charities-detailed-guidance-notes/chapter-3-gift-aid#chapter-31-introduction