Gift aid and payroll giving explained

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The recent suspension of an online giving website, together with publication of the government’s consultation document on gift aid have between them put charitable giving in the spotlight, explains Helen Hargreaves. 

Political support for charitable giving

Successive governments have sought to support and encourage giving and philanthropy. The Labour government of 1997-2010 addressed this first through the modernisation and expansion of gift aid, then its support for the Giving Campaign, before subsequently developing a range of initiatives summarised in ‘A Generous Society’. Since taking office, the coalition government has been no less active. It produced a Giving Green paper in December 2010, followed by a whitepaper in May 2011. It has also introduced the Community First matching fund, to match donations made by individuals and companies for the benefit of their local communities, and initiatives making it easier to give, for example, via cash machines. The tax framework for giving has been important. The gift aid scheme in particular has been successful, showing significant take-up over time. The Budget in March 2011 was also seen to be charity-friendly. It included measures to modernise gift aid, the creation of a new small donations scheme, and measures to encourage legacy giving.

David Cameron, believes...

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  • What is payroll giving?
  • What is gift aid?
  • Overcoming the myths
  • Promoting the tax benefits

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About Helen Hargreaves


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By James26
05th Aug 2013 11:59


Companies don't always bear the costs which can be a problem.  They could set it up to pay directly to the charity, but I think they perceive this as administrative hassle.  Therefore many would appoint one organisation to receive payments.  This then involves charity cheque books etc, which are great, but obviously have a cost that needs to be paid for.  From memory I think this is about 2.5% with CAF, though there are others out there. 

If you are giving small sums in a one off way, this could be good as it saves you filling lots of gift aid forms.  However, if you are giving regular or significant sums to a charity where you know the treasurer fills the gift aid forms at the end of the year (i.e. at no or negligible cost) then you are essentially throwing away 10% of the benefit.

Ideally companies would bear the cost and just make it part of their support of charities.  However, if this is passed on a better charging structure would be to give a choice say 2.5% or a small annual fee.  This would cater for those giving both smaller and those giving a bit more but would like the benefit of a charity cheque book.

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12th Aug 2013 13:00

Payroll Giving Agency required

The employer has to contract with a Payroll Giving Agency to run an apporved scheme. The contributions are paid by the employer to the Agency, which must then distribute the donations according to the employees's wishes within 60 days. Certain charites, including CAF have been approved as agencies and are allowed to deduct a small commission.

With Payroll Giving, if a basic rate taxpayer gives £100 a year, the charity gets £100 but the employee is only £80 worse off because of the tax relief. Using Gift Aid, if the basic rate taxpayer donates £80 to charity, the charity reclaims £20 from HMRC. However, a lot of donors do not understand tax relief and donate £100 under Gift Aid so the charity gets an extrat £25 from HMRC.

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12th Aug 2013 14:49

treasurer prefers standing orders

as someone involved in processing payments in a local charity I have found  it is much easier to have the regular standing order coming in to the bank account from the donor and then make annual gift aid claims than to have receipts from payroll giving.  A few of our members have used payroll giving but the donor had to keep chasing their employers HR department or payroll company to send the donation and the charity did not receive the amount in a regular predictable manner every month.  We then had to ensure those particular donations were not included in the gift aid claim as the donor had made other donations directly which still had to be claimed for.

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