Charitable Gift Aid donations

The following Private Client practice note provides comprehensive and up to date legal information covering:

  • Charitable Gift Aid donations
  • What is Gift Aid relief?
  • How does it work?
  • The declaration
  • Reclaiming tax
  • The Gift Aid Small Donations Scheme (GASDS)

Charitable Gift Aid donations

Gift Aid donations to a charity are an essential part of their income but the tax repayment advantage that they offer can also be abused. HMRC are particularly concerned with this form of donation and their audits seem to be heavily geared to examining the record-keeping and validity of claims for repayment emanating from this area. Therefore, charities need to know in detail how the scheme works and how to record the donations to avoid running into difficulties with HMRC.

HMRC have also been at pains to point out to charities that they must in all cases give:

a full and correct explanation of the law to their donors before the donor makes the declaration

What is Gift Aid relief?

Thankfully it is reasonably straightforward. The basic premise is set out in legislation where it is stated that the Income Tax Acts apply to an individual who makes a qualifying donation to a charity as if:

  1. the gift had been made after deduction of income tax at the basic rate

  2. and the basic rate limit and the higher rate limit were increased by an amount equal to the grossed up amount of the gift

For the purposes of this relief, a qualifying donation is one which satisfies a number of conditions, namely that:

  1. the gift takes the form of a payment of a sum of money

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