Getting to grips with Gift Aid

Any sponsor (and this includes you, the runner, if you donate any of your own money) can claim Gift Aid on the money given to your cause if it comes from a UK taxpayer. Basically, this means that the Government adds to the donated sum the tax paid by the donor on the equivalent amount of income. So a donation of £10 becomes worth £12.50 (£10 plus 25 per cent) to the charity. Higher rate taxpayers can claim even more via their annual return but that’s an issue between them and the taxman: only basic rate Gift Aid is paid automatically.Strictly speaking, the Gift Aid process is not entirely automatic and it is not the donor who ‘claims’ the Gift Aid – it’s the charity. But the donor has a vital role in making the claim possible – as follows:

If using e-giving, there are questions on the site that ascertain that the sponsor is

  • a) a UK taxpayer; and
  • b) is making this payment from taxed income.

The latter question is there because Gift Aid cannot be legally claimed if, for example, you are paying in money via your page that you have raised from a collection or an event. In that situation, the sole taxpayer cannot be identified and Gift Aid cannot be claimed. Charities can get into big trouble with HM Revenue and Customs (HMRC) for inaccurate claims.

Yet another virtue of e-giving is that the e-giving company makes the claim and delivers it direct to the charity, in contrast to Gift Aid, which is generated via sponsor forms. Offline claims are made by the charity and will only be allowed if the donor has given their name and home address including postcode and ticked the ‘I’m a UK taxpayer’ box; a claim cannot be made if there is no postcode or if your donor identifies himself via his company or workplace. This is why your charity will be at pains to stress the rules you need to get your sponsors to follow when filling in a form.

Whereas nearly 90 per cent of online donations come complete with Gift Aid, charities report that compliance issues with the rules on sponsor forms (for example, not supplying a home address or forgetting to include a postcode) reduce that figure to under 30 per cent – which leads to a lot of potential Government support for the cause going to waste.

There is sometimes some confusion about who qualifies for Gift Aid. Unless sponsors are corporate bodies, or foreign nationals, or for some other reason pay no UK tax (income or capital gains tax, but not other sorts such as council tax or VAT), pretty much everyone qualifies. In the £10 donation example above, as long as your sponsor pays at least £2.50 in tax in the current tax year – whether that be income or capital gains – then the donation qualifies for Gift Aid.

A very important final point about Gift Aid: if you have signed a pledge to raise an agreed amount for your charity as a result of being offered a Golden Bond place, you should be aware that the figure you have committed to excludes Gift Aid. Any Gift Aid collected – which will only be determined after application to HMRC – is regarded as icing on the cake, not the cake itself. Your pledge commits you to raising that amount, net, before additional Gift Aid. For this reason, when using e-giving, you should only ever count the net total on your page, not the total including Gift Aid.