A guide to third sector trading - WCVA

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It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support 7.7 Gift Aid on donations from individuals and on donations to charity shops Gift Aid allows charities to reclaim from HM Revenue & Customs (HMRC) the basic rate of income tax on donations made by UK taxpayers. As the current basic rate of income tax is 20 per cent, this means that you can claim an extra 25p for every £1 you are given. All the donor has to do is make a Gift Aid declaration stating that they have paid enough tax to cover that which the charity is going to recover. Higher rate and highest rate taxpaying donors can reclaim the difference between the basic rate that the charity claims and higher rate tax they pay. Research by CAF (2009) found that half of all higher rate taxpayers are not aware of the personal relief on donations available to them, one fifth only have used it, and most are willing to redirect the personal relief to charity. Before you can make a Gift Aid claim you need to be recognised by HMRC as a charity for tax purposes. Recognition by HMRC as a charity is a separate process from registering with the Charity Commission for charitable status. You can claim Gift Aid on gifts of money from individuals. • A gift of money is a voluntary donation for which the donor receives little or no benefit or reward • Money can take the form of cash, cheques, direct debit or standing order payments, credit or debit card payments, telegraphic transfers or postal orders. Additionally, some payments to charities are treated as donations for Gift Aid even though they are not strictly defined as gifts: • Membership subscriptions paid to charities are treated as donations as long as the payment is for membership only and does not give the donor personal use of the charity’s facilities or services. • Admission charges to view a charity’s property can be treated as donations if the payment gives the donor and their family annual admission to view the property, or if a donation of at least 10% more than the standard cost of admission is made. 202
It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support • Charity auctions often encourage people to pay more for an item than it is worth, in order to support the charity. These payments may be treated as donations under certain circumstances. For example if someone paid £700 for a pair of travel tickets that cost £500, the extra £200 is considered to be a donation and can be Gift Aided. Further guidance on the above is available from WCVA’s Giving Wales Officer 0800 2888 329, givingwales@wcva.org. uk, www.wcva.org.uk/giving or on the HMRC website. What else can I claim Gift Aid on? Gift Aid can apply in other situations if the correct procedures are followed carefully. Please contact the Giving Wales Officer at WCVA or look at the detailed guidance on the HMRC website if you are considering claiming Gift Aid for any of the following: • Sale of goods on behalf of an individual Because Gift Aid applies to gifts of money, a donation of goods to a charity is not a Gift Aid donation. However, it is possible for the charity or charity shop to offer to sell the donated items for the donor, who may then choose to give the cash proceeds of the sale to the charity using Gift Aid. • Volunteer expenses If a person incurs expenses while doing voluntary work for a charity but does not claim them back, this is not a gift of money and so Gift Aid cannot apply. However, if a charity’s volunteers are paid expenses, and are free to keep the money or make a gift to the charity, they can use Gift Aid on that gift. • Adventure fundraising events Participants in these events usually pay a deposit and are asked to raise a minimum amount for the charity through sponsorship. Because taking part in the adventure is a benefit to the person taking part, there are restrictions on the sponsorship donations that qualify for Gift Aid – it is likely that donations by the participant and their family will not be eligible for Gift Aid but sponsorship by unrelated people will be eligible. From April 2013 there will be a new scheme to allow Gift Aid on up to £5,000 of small donations without the need for declarations. 203
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