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Charity Tax Reclaims

aka Tax Efficient Giving

Updated 14/7/08

Follow the trail

This page

  • Information on Gift Aid as well as other options.
  • Useful software for managing donations/tax reclaims.
  • Other advice resources.

Most of this material was pulled together from various existing items in early 2000. Most of it will still be relevant, but it could do with some updating. Suggestions welcome.

Elsewhere

Gift Aid, Deeds of Covenant, Payroll Giving .....

Significant changes to Charity Taxation were introduced by the 2000 Budget. The HM Revenue & Customs website is the key source in this area - start at the Charities Gateway. This has (at Nov 04) drop-down selections for the various tax exemption areas (e.g. payroll giving) and forms.

Leaflets you might want to get:

The Clubs & Charities leaflets are anything up to 20 or more pages long - allow time for the downloads!

The Basics

The limit on Payroll Giving was abolished from April 2000 (previously £1200 per employee), and to promote the scheme the government is to add 10% on such donations, during the following 3 years. Give As You Earn can be operated on behalf of any non-profit organisation which has been recognised as such by the Inland Revenue. You have to operate the scheme via an approved agency.

The days are numbered for Deeds of Covenant as the revised Gift Aid system has no minimum limit (previously £250). There are potential traps and admin nightmares around values of benefits received in exchange for donations (e.g. newsletters or perhaps for larger donors, special seats at events or chances to meet celebrities) - see the guidance notes. Phone and Internet giving can also now be included - but you have to send a written confirmation which includes a chance for cancellation. Note that old Deeds of Covenant (signed pre-April 2000) can continue until they run out - any new ones have to have a Gift Aid declaration too if you want to claim back tax. The Covenant's advantage is that there is commitment made by the donor, but Gift Aid is more flexible.

Reclaiming tax (which is income tax or capital gains tax) is done at the standard rate, currently 22%. It is easy to assume you claim 22% of the donation. Not so! Remember, the 22% has effectively already been deducted, so what you are claiming is 22% of the higher amount BEFORE that deduction. The maths is: tax reclaim = donation x (100/(100-22)), which is the same as adding 28% (rounded down). There are bound to be queries on this from time to time! IT for Charities have written a little bit of Javascript which you can put on your website (for free) to show how much a donation increases by.

There is a specialist Inland Revenue branch dealing with charity tax issues, in particular income tax repayment claims. Still often referred to as FICO, its now officially Inland Revenue Charities. Forms and procedures have been simplified, but with greater security, from April 2000.
- IR Charities (Repayments), St John's House, Merton Road, Bootle, Merseyside, L69 9BB, phone 0151 472 6036/6037 (Gift Aid) or 0151 472 6029/6053/6370/6371 (Payroll Giving) or 0151 472 6046 (Giving shares).
- The reclaim work of the Scottish office is being transferred to Bootle, June 04.
- Local rate helpline 08453 02 02 03.

Admin

We have reproduced a copy of the HM Revenue and Customs specimen Gift Aid declaration.

A crucial element of your systems is having an 'audit trail' so that it is possible to go from the claim you submit to the original records and documents both for the money given and the Gift Aid declaration (you may have obtained a 'global' declaration covering any donation from 6th April 2000). See below about filling in and submitting claim forms so that Inland Revenue can process them. The new form is now available, and will be sent automatically if you submit a tax reclaim, under the 'old' scheme or otherwise.

Relevant extracts from the Getting Britain Gift Aid Guidance document (see above on how to download the whole):

"8.2 You should use the existing claim form R68 and schedules to reclaim tax for:
•Gift Aid donations and covenanted payments by individuals received before 6 April 2000
•covenanted payments by individuals received on or after 6 April 2000 but falling due before that date
•Gift Aid donations and covenanted payments by companies received before 1 April 2000."

"8.4 You will no longer have to complete separate schedules for Gift Aid donations and covenanted payments – in future there will only be one type of schedule for all donations. You will have to enter the following details on the new schedule for each donor:
•the donor’s name
•the date of the donation, or, where the claim covers more than one donation by the donor, the date of the last donation
•the total amount of donations by the donor on which you are claiming in the schedule.

8.5 You will have to complete a separate schedule for each tax year, or part tax year, included in the claim. It will no longer be necessary, however, for you to calculate the tax relating to each donation separately. You will simply be able to calculate the total tax reclaimed for all the donations shown on each schedule."

8.6 ........Remember – do not reclaim tax for any donations by companies received on or after 1 April 2000.

"8.7 You can start making your tax reclaims immediately from 6 April 2000.

8.8 In the case of covenanted payments falling due on or after 6 April 2000, you need no longer wait until after the due date has passed before reclaiming tax – you can reclaim tax at any time after you receive the payment."

 

Software for claiming back tax

Although Gift Aid now isnt too complicated to administer (once you have sorted out any benefit issues), smaller charities may want help.

Also check out some of the web services mentioned on Web in Practice, e.g. JustGiving.

Other resources

We can't cover all the possibilities for registered charities here. So, as well as HM Revenue and Customs sources: