Following on from CFG's Gift Aid seminar in January 2023, Rachelle Rowbottom from BHP shares updates and advice on how to make the most of Gift Aid.
Against the backdrop of the cost-of-living crisis, when costs are increasing and generating income is more challenging than ever, it is important that charities maximise income from Gift Aid and take advantage of easy wins.
Voluntary donations
Gift Aid can be claimed on voluntary donations from individuals where any benefits provided in return fall below the donor benefit thresholds. Of course, the donors need to have paid sufficient tax and need to complete a Gift Aid declaration.
Fundraising events
It is important that finance and fundraising teams work together to structure fundraising activities that maximise income from voluntary donations where possible.
Clearly, there are commercial considerations that need to be factored in. For example, if a charity organises an event, the charity may choose to charge an admission fee or ticket price, which gives some certainty over income streams.
Compulsory payments or charges cannot be Gift Aided, but a suggested donation that is paid voluntarily by the individual (in addition to the ticket price that provides entry) would be eligible for Gift Aid
Where funds are raised via a charity auction and donors knowingly pay more than the commercial value for the lots, a Gift Aid opportunity arises in relation to the excess over the commercial value.
Higher and additional rate relief
Many donors don’t claim the higher and additional rate tax relief that they are entitled to. Charities should therefore be in a position to explain the tax relief and the net cost to donors of making a donation (after taking account of the relief).
There are some surprising outcomes – a donor that is a higher rate taxpayer and with income in the band between £100k and £125k (where the personal allowance is withdrawn) can benefit from tax relief of 60%!
Rights of admission to view charity property
Where charities charge an admission fee and, in return, grant the individual (and members of the same family) the right of admission to view charity property, in certain circumstances the benefit can be disregarded and Gift Aid can be claimed.
This involves the charity either offering free admission for a period of 12 months, or the individual paying 10% more than the normal admission price. There are qualifying criteria to fulfil and administration requirements, but the benefits can be substantial.
Retail Gift Aid Scheme
Where a charity or trading subsidiary operates a charity shop, it should consider maximising income from the Retail Gift Aid Scheme. By way of an overview, the shop acts as agent on behalf of the donor to sell donated goods and the donor retains legal title to the goods.
Once the goods are sold by the shop, provided the donor agrees, the proceeds can be donated to the charity as a voluntary donation. There are different ways that the scheme can be administered, and the strict requirements of the scheme should be followed.
It is important that staff and volunteers receive adequate training so that they understand the scheme and can explain it to donors when they drop off their goods.
Trustee and volunteer expenses
Where trustees and volunteers do not claim expenses that they are entitled to e.g. for attending meetings, there is a Gift Aid opportunity.
Trustees and volunteers should be encouraged to claim expenses and if they do not want to retain the benefit of the claim, they can choose to donate the money back to the charity and the charity can claim Gift Aid.
There should be a clear audit trail i.e. the trustee or volunteer should submit an expense claim in the usual way, a Gift Aid declaration will be required in respect of the donation, and both transactions should go through the charity bank account.
Gift Aid Small Donation Scheme (GASDS)
For cash or contactless donations of £30 or less, where it is not practical to obtain Gift Aid declarations, don’t forget to make a claim under the GASDS!
Charities can claim GASDS on a maximum of £8,000 of donations collected anywhere in the UK, or, where they operate via more than one community building, a maximum of £8,000 per community building.
Under the community building rules, the donations must be received in the same local authority area as the community building to be eligible. Charities therefore need to consider which method is most beneficial.
Watch our Gift Aid Seminar
If you would like further information, please email Rachelle Rowbottom.