Gift Aid – Donor Education

As you will be aware, charities can boost the value of donations by 25% by making a Gift Aid claim. Gift Aid is a system of tax relief allowing charities to reclaim the basic rate income or capital gains tax that the donor has paid.

Over the past decade the ways in which charities and their supporters raise and collect funds from donors has diversified. This is both in terms of the types of events which are held in support of charities and the method by which funds are collected (e.g. via sponsorship forms, fundraising web pages, internet giving, contactless payments).

HMRC have tried to keep up with these changes by updating legislation and their guidance notes for claiming Gift Aid. However, the rules around Gift Aid can still be quite complicated.

At a recent seminar we attended, HMRC reported that they found increasing numbers of Gift Aid donations that do not qualify. This was particularly evident by HMRC upon a review of donations made through online platforms. HMRC found many examples of “Gift Aid” donations that were not made by individuals for which a benefit was not received. Rather, one donation might have related to a bucket collection, an office dress down day, a cake sale etc.  HMRC estimate that up to £1m per month was being paid out in Gift Aid when it should not have been due.

As a result of this research HMRC are seeking to encourage charities to educate their donors on the Gift Aid rules via information provided in fundraising packs and by introducing an online gift aid eligibility test.

In the past 12 months HMRC have been working closely with all of the large online platform providers around Gift Aid. You will now notice an additional step in the donation process when you make a donation through one of those websites.

HMRC are encouraging all charities to include this additional step in the online donation process.  Although the wording is not prescriptive, in addition to the standard Gift Aid declaration, HMRC have requested that donors should be asked to confirm that three statements apply to the donation:

  1. I am donating my own money and the funds have not come from anyone else including family members or from an office or bucket collection.
  2. The money I am donating is not the proceeds from sales of goods or services or the sale of tickets.
  3. I have not received something in return for this donation such as an entry ticket to an event or a raffle ticket.

With HMRC encouraging charities to improve donor education around Gift Aid, it is a good time to review your fundraising packs (especially those contain fundraising ideas which involve non-qualifying events), sponsorship forms and online giving processes to ensure that they incorporate best practice.

By demonstrating that donors have been provided with the relevant information to make the appropriate choice around Gift Aid, this should help ensure that charity Gift Aid claims are not delayed or reduced.

If you have any queries around Gift Aid please don not hesitate to contact Louise Cottam or Simon Brown.