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13 February 2018

In giving you receive – gifts to charities


I am considering making a number of gifts to charity before the end of the tax year. What tax benefits apply on personal gifts to charities?


If you are thinking of making a gift to charity, it is possible to make tax-effective gifts.

UK charitable tax reliefs are available to certain organisations which are the equivalent of UK charities and Community Amateur Sports Clubs (CASCs) in the EU.

If you pay tax, Gift Aid is a scheme by which you can give a sum of money to charity and the charity can normally reclaim basic rate tax on your gift from HMRC. That increases the value of the gift you make to the charity. So for example, if you give £10 using Gift Aid that gift is worth £12.50 to the charity. You can give any amount, large or small, regular or one-off. If you do not pay tax, you should not use Gift Aid.

There are three main conditions to qualify for Gift Aid. You must:

  • Make a declaration to the charity that you want your gift to be treated as a Gift Aid donation
  • Pay at least as much tax as the charities will reclaim on your gifts in the tax year in which you make them
  • Not receive excessive benefits in return for your gift

The declaration is the charity’s authority to reclaim tax from HMRC on your gift. The declaration can be in writing or orally but, usually, the charity will provide a written declaration form.

You do not have to make a declaration with every gift. In order to make a Gift Aid donation you’ll need to make a Gift Aid declaration. The charity will normally ask you to complete a simple form – one form can cover every gift made to the same charity or CASC for whatever period you choose, and can cover gifts you have already made (backdating your claim for up to four years) and/or gifts you may make in the future.

The government announced in the Autumn Budget 2017 that they will introduce legislation to simplify the donor benefit rules that apply to charities that claim Gift Aid. The government have confirmed that four extra statutory concessions that currently operate in relation to the donor benefit rules will also be brought into law. The changes will have effect on and after 6 April 2019.

Where you have raised money which has simply been collected from other people, such as on a flag day, and the other people have not made a declaration to the charity that they are taxpayers, the payment is not made under Gift Aid and generally no tax relief is due but Charities and CASCs can top-up small gifts under the Gift Aid Small Donations Scheme.

If you are a higher/additional rate taxpayer, you can claim tax relief on the difference between the basic rate and higher/additional rate of tax (through your tax return). Relief is given either for the tax year of payment or in some cases it is now possible to elect to receive the benefit of the higher/additional rate tax relief one year earlier than previously.

You should therefore keep a record of payments made under Gift Aid for each tax year.
The time limit for claiming tax relief on Gift Aid donations is four years. This time limit applies to the charity and the individual making the gift.

The advice above is specific to the facts surrounding the questions posed. Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
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