Claiming gift aid: What are the rules?

January 16, 2020

Most charities rely on the generosity of their donors to fund the important work they do, whether through fundraising events, sponsorship challenges, collections, or individual donations.

The additional relief that’s available through gift aid can make even more of those donations – but the complexity of the system can mean charities often miss out.

According to HMRC, gift aid was not claimed on a quarter of the donations that were eligible for it in 2016, costing the charity sector £560 million.

Much of the time, this is because charities aren’t aware of what they could claim, or how the gift aid rules apply to their donation.

How does claiming gift aid work?

Gift aid allows you to claim 25p for every £1 someone donates to your charity, but as many in the charity sector will know, it’s not always as straightforward as it sounds.

In order to qualify for it, the donor must have paid at least as much in income tax or capital gains tax as you want to claim, and they must have made a declaration giving you permission to claim it.

Some types of donations don’t qualify for gift aid. You can’t claim on a donation from a limited company, for example, or on payments made through payroll.

You can’t claim on payments that a person has made for goods or services, either, or ones that entitle the donor to a benefit worth more than certain limits.

This makes it tricky to work out whether you can claim for certain fundraising events – ones where you charge tickets on the door, for example, or for sales of products in a charity shop.

There are different rules depending on the type of event you run. In general, though, you can’t claim gift aid on a donation that’s compulsory to access goods or services, but you may be able to claim for a voluntary one.

For example, if you sell tickets to a charity concert, the base price required to attend does not qualify for gift aid, but you could suggest that customers make an optional donation on top. It may be possible to claim gift aid on that additional amount.

Small donations

When you’re passing around a collection bucket for donations of small change, it’s unlikely that you have the chance to ask every donor to make a gift aid declaration. But that doesn’t mean you can’t claim gift aid at all.

The gift aid small donations scheme allows you to claim 25% on donations of £30 or less. For donations made before 6 April 2019, that only includes cash – but for those made on or after that date, contactless payments qualify too.

With this scheme, you don’t need donors to have completed a gift aid declaration, making it much easier to claim gift aid on small amounts.

You can currently claim up to £2,000 in a tax year with the scheme, but to use it, your charity must have claimed gift aid at some point in the same tax year. You can’t use it if you’ve had a gift aid penalty in the last two tax years.

For donations made before 6 April 2017, you must also have claimed gift aid in at least two of the last four tax years, without a two-year gap between claims.

Talk to us

Gift aid, along with other areas of charity regulation and tax, can be complicated, but we’re here to help you navigate it.

Find out more about our services for charities and non-profit organisations, or get in touch with one of our experts today.

Dick Haffenden

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Dick Haffenden JCS

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Tell us about yourself, your goals and what you need to achieve them and one of our team of friendly accountants will be in touch to begin the conversation.

020 8643 1166

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