Gift aid

Gift aid

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Hi,

I help out a charity which deals with relationship counselling. They claim gift aid on the difference between the value of 'contributions' from clients and the direct costs of the counselling session (ie, counsellors and chaperones wages).

I've re acquainted myself with HMRC's rules on donations with benefits, and they seem quite clear: if the donor benefits from their donation, that donation will not qualify for gift aid. (If the donation comes attached with a condition that it buys goods or services from the donor.... - these are not gifts'. 

However - I am aware that other branches of this charity claim gift aid on all donations - many without even making a deduction for the direct costs element. I am also aware that other counselling charities claim gift aid in the same way.

Can anybody shine any light on this? If I'm going to make myself very unpopular by telling them they can't continue to claim gift aid I want to be pretty sure I'm right!

Many thanks for any help given
Ali
 

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By Phil Barbasiewicz
07th Sep 2011 17:06

Gift Aid & benefits

I suggest you take a closer look at the HMRC guidance found here:

http://www.hmrc.gov.uk/charities/guidance-notes/chapter3/sectiond.htm

The sections applicable are 3.28-30.

Basically there are 2 tests you need to consider when determining whether gift aid applies.  The guidance is pretty clear I think.

From what you say it looks as though the charity will need to split out the donation received between the donation for gift aid purposes and the benefits.  I've come across gift aid declarations produced by charities in the past which show this split so hopefully your charity can come up with something similar and not lose out.

Hope this helps.

Phil

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By Phil Barbasiewicz
08th Sep 2011 09:41

Gift Aid & benefits

Hi Ali,

What exactly are the 'direct costs' you refer to?  I just wonder whether this is counted as 'benefits' for the purposes of gift aid.

According to the HMRC guidance at 3.26.1, a benefit is defined as being an item or service associated with the donation so I think you need to consider whether or not the conditions in 3.26 apply or not and go from there.

Unfortunately all my past experience on gift aid comes from dealing with the personal tax affairs of the donor, not the perspective of a charity so sorry I can't give a more detailed answer.

Good luck.

Phil

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Replying to dbowleracca:
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By alison18
08th Sep 2011 14:19

gift aid & benefits

Hi Phil,

The direct costs are the costs of the counsellor and chaperone.

From what I've read I still can't see how the charity can justify claiming gift aid. Even the splitting the donation seems unfeasible, as the guidance states that the benefit must be able to be purchased separately (eg as with a patron donating £100 and receiving £50 worth of theatre tickets). I think I'll have to tell them the bad news.

Thanks for your help anyway

Best wishes
Ali

 

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