Guidance on Gift Aid

On September 3rd, 2019 HMRC updated its online guidance covering donations on which charities and Community Amateur Sports Clubs (CASCs) can claim Gift Aid relief.

In essence, changes to benefit rules, charity auctions and educational school trips have been updated. This will have implications for both charities and companies in terms of accounting and we have stripped out the essentials so here’s what you need to know.

Firstly, it might be useful to know the full definition for Gift Aid as stated by HMRC.

 

What is Gift Aid?

“Gift Aid can be claimed on donations of money made by an individual UK income taxpayer. It’s an easy way to help your charity or community amateur sports club (CASC) maximise the value of donations.

“To claim Gift Aid, you must be recognised by HM Revenue & Customs (HMRC) as a charity or CASC and you’ll need to ask donors to make a Gift Aid declaration.

“In certain circumstances, some payments made to charities which are not strictly gifts, like membership subscription paid to a charity, may be treated as donations for Gift Aid purposes.

“If any donor or person connected to the donor benefits significantly from their donation, it doesn’t qualify for Gift Aid.”

 

The benefit rule – what does it mean for charities?

For charities who wish to thank a company or individual who has made a donation, there is updated advice on giving an item or service in return for a donation, known as the ‘benefit rule’.

If the retail value of the item or service is not known, the charity will need to work out how much someone would be prepared to pay e.g. look at the value of similar items or services.

Charities can claim Gift Aid on the donation if the value of the benefit doesn’t exceed certain limits, for example:

  • For a donation of up to £100, the maximum value of benefit is 25%
  • For over £100, it is 25% of £100, plus 5%of £101 up to a total value of £2,500

Charities must keep a record of Gift Aid donations received and all benefits that were given to donors. The benefit rules apply to different types of donation, like charity auctions and may affect the amount you can claim.

 

Charity auctions – what are the implications for businesses and charities?

 For a business or individual attending a charity auction, Gift Aid can’t be claimed when the retail value of an item exceeds the benefit limits but it is possible for the payment to be split between an amount to ‘buy’ the item and an amount that can be treated as a gift. To do this the value of the item auctioned is subtracted from the amount paid.

The benefit for Gift Aid is calculated as before and when the value exceeds the limits in the benefit rules, the company or person can ‘buy the benefit’.

Donations to schools, charities involved in running schools and Educational Trusts

When considering donations, businesses and charities need to be aware that ‘only voluntary gifts or payments are eligible for Gift Aid’.

Voluntary contributions are eligible if they’re non-refundable or any benefit (for example, travel costs, trip insurance, cost of entry) does not exceed maximum levels of allowable benefit for the donation.

As before, the benefits are calculated as per the benefit rule above.

 

This can seem like quite a complex area to negotiate so if you would like to have a chat or just want to find out the best option for you, get in touch with us today on info@chuhanandsingh.co.uk or 01642 244090, and we’ll go through everything you need to know.