Let’s fast forward to the new Chancellor’s first Budget speech. Amongst the inevitable headline-intended spending increases, below the radar tax rises and jokes about his or her favourite tipple, there is a surprise announcement for the charity sector… a half a billion-pound HMRC funding pot!
The good news is it’s open to all charities regardless of size and purpose, immediately available and, at lower levels of funding, requires only minimal paperwork. The only requirement is that the charity receives donations from individuals. Great!
Ok, so before you get too excited, the above announcement is highly unlikely (sorry). But that is in effect what HMRC are offering with £560m of Gift Aid going unclaimed each year. So, what exactly is Gift Aid and how, if you’re not already, can your charity go about claiming it?
What is Gift Aid and how does it work?
Gift Aid is a government-operated scheme that allows registered charities or community amateur sports clubs (CASCs) to claim back 25p for every £1 donation made to that charity. The charity does this by reclaiming from HMRC the basic rate of income tax the individual has paid on the donation. Let’s imagine your donor earns £125 gross pay, at a basic rate of 20% she receives £100 and £25 is paid to HMRC. She then donates that £100 to you (a charity) who can reclaim the £25 tax she paid.
Key to this process is that the donor must have paid an equivalent amount of income tax or capital gains tax and provide the charity with a Gift Aid declaration. Gift Aid declarations require the donor’s name and address, identification of the charity, identification of the gift(s) to which the declaration should apply, a tax to cover statement and an HMRC model declaration.
To read the full Charity Today news story click here.
Source: Charity Today