A Gift Aid donation from an individual tax payer is deemed to be paid by that individual net of basic rate income tax.As the charity is exempt from paying tax on donations received, it can claim the tax back from HMRC (subject to meeting the detailed Gift Aid rules).So, for example, if a non-taxpaying individual makes £80 of donations this tax year, the charity(ies) will claim £20 and £20 will be due from the individual to HMRC.In such cases, it is important to get in touch with the charities to cancel the Gift Aid declarations.Amendments have been made to the conditions of the scheme from time to time over the past 25 years and in April 2016, HMRC changed the Gift Aid declaration.The declaration is the means by which the taxpayer agrees that their donation comes within the scheme.UK organisations who wish to register as a charity - To register with the Charity Commission, contact them on: 08.Alternatively, read their publication CC21: Registering as a Charity, which is located here.
The scheme applies to cash donations of £20 or less, received after 6 April 2013.The new version clarifies that if an individual has not paid enough tax to cover the tax reclaimable by the charity, they (the taxpayer) are responsible for paying any difference to HMRC.The new style declarations should have been in use from 6 April 2016 except where: • an individual has signed an old style declaration form which covers multiple donations. • a charity holds stocks of printed declarations, ordered and printed before 21 October 2015. A declaration by a donor can also be made verbally or online, e.g. Charities must ensure the updated format is used in every case.If your charity has a good relationship with your volunteers or trustees, you may want to see if they could undertake your Gift Aid claims – anyone with experience of finance or tax would be ideal.HMRC allows community groups or voluntary organisations to register as an ‘umbrella charity’ in relation to Gift Aid – this allows the umbrella charity to receive donations on behalf of another charity, claim the Gift Aid and pass over the donation plus Gift Aid to the nominated organisation (minus a small, previously agreed administration fee).The charity must make a Gift Aid claim within 4 years from the end of the accounting period in which the donation was made.It is worth noting that after the end of transitional relief in April 2011, HMRC will only backdate claims for transitional relief for 2 years after your charity's tax year end.Higher rate taxpayers also can claim tax relief on their Gift Aid donations, which amounts to 25% of those donations.So, additional rate taxpayers effectively receive 31.25% tax relief on any money they give.For more information on the Gift Aid Small Donations Scheme see the HMRC webpage Charities must be aware that there are time limits for making Gift Aid claims.All charities must consider the '4 year rule' on all Gift Aid claims.