Under the Gift Aid scheme, implemented on 06 April 2000, you can reclaim the tax a donor paid on a gift from HM Revenue & Customs, at the current basic tax rate of 20%. In effect, the total value of a gift to your organisation increases by 25%, at no additional cost to the donor. For every £1 given to your organisation, you can claim an additional 25 pence from HM Revenue & Customs. If you have many regular supporters who give recurring gifts, this can quickly generate additional revenue for your organisation.
Note: The tax reclaim amount is calculated using this formula: Total Gift Amount / (100 - Tax Rate) x Tax Rate. For example, a donation of £50 has a tax claim amount of £12.50 using the 20% tax rate: 50 / (100 - 20) x 20 = 12.50.
To turn donations into Gift Aid, a donor must provide a Gift Aid declaration, which can be used for one-off cash gifts and payments for recurring gifts and pledges of any amount the donor gives, now or in the future, as long as the donor remains a UK tax payer. The donor can provide the declaration in writing, orally, or by way of the internet. When the donor gives the declaration orally, if you do not have a sufficient auditable record, you must send a confirmation letter to the donor. This confirms the details of the declaration and gives the donor 30 days to withdraw. Gift Aid declaration records are stored on the Declarations tab of a constituent’s Revenue Information page. To learn more about Gift Aid and what to include on your Gift Aid declaration forms, go to www.hmrc.gov.uk/charities.
For more information about a constituent’s Declarations tab, refer to Declarations.
Note: HM Revenue & Customs offers a transitional Gift Aid relief rate of 2% for gifts dated between 6 April 2008 and 5 April 2011. Gifts dated within this time frame are subject to the current tax rate of 20%. Previously, a 22% tax rate was in effect. Because of the tax rate difference, HM Revenue & Customs automatically gives a transitional relief rate of 2% for all qualified gifts. You do not need to claim this difference.
To reclaim payment of tax under the Gift Aid scheme, your organisation must be a charity. In England and Wales, you must register as a charity with the Charity Commission, unless you are excepted from registration. For information about how to register as a charity, visit the Charity Commission website at www.charity-commission.gov.uk. In Scotland and Northern Ireland, HM Revenue & Customs must accept you as a charity. For information about how to become a charity in Scotland, visit the Scottish Council for Voluntary Organisations website at www.scvo.org.uk. For information about Northern Ireland charities, refer to the Northern Ireland Council for Social Services website at www.nicva.org.
To participate in Gift Aid, you must first specify tax settings, rates, and disqualification rules on the Gift Aid Settings page.