What is Gift Aid and how does it work with Charities in the UK?

Gift Aid

Gift Aid is a way that charities or Community Amateur Sports Clubs (CASCs) are able to claim back tax for donations made to them by UK taxpayers.

What is a Community Amateur Sports Club (CASC)?

A Community Amateur Sports Club or CASC is a sports club which has either applied to the Charity Commission to be granted charitable status which will entitle it to the same tax treatment as that which is available for charities or has applied to HM Revenue and Customs for the tax relief available specifically for these sports clubs.

Are all charities or CASCs eligible for Gift Aid?

To be eligible for Gift Aid a charity of CASC must register with HM Revenue and Customs.

How does the principle of Gift Aid work in practice?

When a gift or a donation is made to a charity that charity will then be able to claim back the basic tax rate on the gross equivalent. This effectively means that following the introduction of Gift Aid in April 2008 charities can claim back 20% of the amount donated meaning that for each pound donated to that charity an additional 25 pence can be reclaimed back by the charity.

Following on from this a further transitional relief is available which takes into account the fall in basic tax rate meaning that HM Revenue and Customs will pay a further three pence for each pound donated.

This effectively means that for each pound donated to a particular charity they are able to claim back a total of 28 pence from HM Revenue and Customs – a figure that will certainly make a valuable increase to donations provided to charity.

What donations will be able to have Gift Aid claimed back on them?

In order to qualify for Gift Aid the gift made to the charity must take the form or a payment of a sum of money which is not subject to a condition such as repayment made to the UK resident when the gift is made. Accordingly something like writing off a debt will not qualify for gift aid.

What happens if I am stopped in the street by a charity fundraiser and decide to make a monthly donation to a particular charity?

Being stopped in the street by a charity fundraiser is something that will be experienced by most people at some point in their life and is an extremely effective way for a charity to make money. Many people will decide to sign up on the spot and will pledge to make a monthly donation through a direct debit scheme. This is exactly the kind of charitable donation which will enable the charity to claim Gift Aid and may often be used as an example to illustrate just how much difference a continued donation from an individual can make.

Certain issues which Charities may not be aware of when trying to claim Gift Aid

There are however, certain issues which charities must be aware of but in certain situations are not aware of when dealing with Gift Aid; they most often fall into the following two categories:

  1. Gifts of assets to Charity
  2. Admissions to Charity Property

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For more information on:

  • Gifts of Asserts to a charity
  • Strict Conditions for Retail Gift Aid
  • Admissions to Charity Property
  • What is meant by charity property?
  • What is meant by a voluntary gift?