Gift Aid: Avoiding pitfalls when claiming relief

Under the Gift Aid scheme, charities may reclaim basic-rate tax from monetary donations received from UK taxpayers. In the case of a donor making a charitable donation of £100, the charity will receive the donation of £100 and because the donation is deemed to have been paid under the deduction of basic-rate income tax, the charity can reclaim £25 from HMRC (being £100/80 x 20). If the donor is a higher or additional rate taxpayer (and intermediate rate in Scotland), the extra relief due can be claimed via the self assessment return or the PAYE code. 

Where donations are from joint bank accounts, care should be taken to determine the identity of the donor. Joint donations should be accompanied by joint Gift Aid declarations, so should be considered carefully before the donation is made if the donors pay tax at different rates. 

Healthy scepticism

In providing details of donations, the taxpayer may incorrectly treat all payments to charities as qualifying gifts and confusion arises when membership of organisations such as the National Trust qualify for relief, whereas others don’t. Preparation of correct claims in returns therefore needs a healthy scepticism. 

Taxpayers making donations to charities can claim Gift Aid relief if any benefit they receive in return is minor. A visit to a heritage property does not prevent relief provided that the amount paid is at least 10% more than the published admission price, or admission is allowed for at least 12 months during public opening hours. This enables charities such as the National Trust to allow access to their properties to members while treating the membership fee as qualifying for Gift Aid relief. 

While viewing property, artwork and so on does not prevent relief, use of facilities does. So while relief can be claimed for National Trust or English Heritage membership, membership fees for gyms, tennis or golf clubs for example do not qualify for relief if access to training or games is given. The level of subscription is often an indication as to whether the payment is support for a charitable sports club or gives access to the facilities. 

Membership gifts

It should also be remembered that taxpayers can claim relief for their own membership fees, but not memberships given as gifts to others. The payment is regarded as a gift to the other member, and not a gift to the charity, so relief cannot be claimed. An exception is membership of organisations such as Brownies or Scouts. An adult can claim relief under Gift Aid for a child’s membership but not for fees such as for trips or camps. 

Double-counting can occur if a taxpayer makes donations through an account with the Charities Aid Foundation (CAF) or similar arrangements. Tax relief can be claimed on donations to accounts such as with the CAF and the CAF claims the basic rate tax suffered by the donor. The donor typically makes gifts to charities and appeals from their CAF funds, so payments are from “gross” income. Further relief therefore cannot be claimed under Gift Aid on the donor’s payments from the CAF account to the charity. 

Learned exceptions

Occasionally, a taxpayer cannot claim relief for subscriptions to learned societies against PAYE income, for example because the society is not on “List 3”, HMRC’s list of approved bodies. This is also the case if the payer has retired and can no longer claim the subscription as “wholly, necessarily and exclusively” in connection with an employment. Professional bodies may be registered charities, so relief may be obtained by paying membership fees as Gift Aid payments. The societies should be able to confirm this with the payer, and it may be possible to backdate the claim. 

For further detail on sponsored events, valuations at charity auctions and so on, see Chapter 3: Gift Aid on www.gov.uk.