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Gift Aid: Avoiding pitfalls when claiming relief

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The Give Aid rules may encourage taxpayers to be more generous, but are dotted with conditions and potential snags for both charities and donors. Jane Wanless explains how to navigate around the niggles.

13th May 2022
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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.

Replies (7)

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By Hugo Fair
13th May 2022 15:58

Interesting summary of the basics ... especially the bit at the end about paying 'subscriptions' as a Gift Aid payment. Does this not potentially fall foul of the 'qualifying gift' rules, if the member (say a 'mostly retired' practitioner) might be deemed to get anything in return for the payment?

Also, the sentence "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" ... should perhaps make it clearer that the 'extra relief' can only be claimed by the taxpayer, not by the charity.
I know that'll be obvious to most readers here, but I've encountered many taxpayers over the years who've not understood this.

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By Not Anonymous
13th May 2022 18:53

And relief isn't just given via a Self Assessment return or tax code.

It can be included in an informal (P800) calculation or Simple Assessment (PA302).

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By NotAnAccountant2
14th May 2022 07:56

I wish that qualifying memberships (like the NT or EH examples) could be paid for via a CAF account.

Obviously the payment amount would have to be grossed up but it would make life so much easier and CAF and the charity could sort out what is and isn't allowed.

Apart from anything else, it's quite a lot of work to check and keep up to date. Cycling UK has gone from not allowed to allowed and back to not allowed in the space of about 5 years.

I have some +1 memberships. Some the basic membership fee is still allowed but the +1 extra amount not and others it's stated as none is eligible. (since getting married most of my +1 are now joint instead)

It's confusing if you have a joint membership - does the person who pays get the tax relief or is it split 50/50? (FWIW I pay and I claim)

And on at least one occasion I've had the charity email after I've submitted my tax return to say they've made a mistake and gift aid wasn't available for that year - sorry HMRC but I'm not wasting my time updating my tax return for 10 quid of underpaid tax (you need to fix those stupid emails telling me to submit my tax return early - before the P11D deadline even - do you want me to leave stuff off?)

Oh, and fix that daft rule about only the first set of figures submitted are valid and cannot be corrected (think it was carried back to earlier year gifts) while you're at it.

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By Justin Bryant
14th May 2022 08:38
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the sea otter
By memyself-eye
14th May 2022 17:51

why isn't gift aid automatic from individual to charities at say.....15%

Oh I forgot, that's too logical.

Stupid system.

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Replying to memyself-eye:
paddle steamer
By DJKL
16th May 2022 13:12

Because if they are not taxpayers the donors would be liable for the tax, albeit this rule could be changed. (Once had a client caught with this for a very small sum)

Even giving books etc to charity could catch one out , I have gifted quite a few books recently to St Columba's Hospice shop in Edinburgh (14 large Sainsbury bags for life worth) , these gift are covered by a Gift Aid election and at end of the tax year they will apparently send out a statement stating values realised re my donation re Gift Aid (Oxfam bookshops also used to do this), it is accordingly easy for non taxpayers to get caught out signing up for these things without understanding the implications.

I certainly have sympathy re the article's point re difficulty recognising which "subs" qualify and which do not, each year I have to do this for one of my employers and it is a pain.

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By Ian Bee
17th May 2022 11:13

The whole system could do with an overhaul.

Many charities are small operations run by volunteers but rely on the gift aid relief for income. There is a process for recovering gift aid from HMRC which is inevitably complicated and time consuming. It has to be done on line, no problem with that, but correcting errors takes ages. You might think that it's your own fault for making errors but the form is so particular that it is an error if you omit someone's title (Mr/Mrs/Ms etc) and if you miss a full stop after it. Similarly if the post code of any of the donors has a double space between the two sets of three letters/numbers.

I can only assume that large charities have to employ great teams of people to deal with the recovery.

At the other end, as said above, the donor can be liable to income tax if their liability from other sources is smaller than the gift aid relief. I had a family member caught out by this a few years ago and it only gets picked up if you have to complete a tax return. This could be easily resolved if you were allowed to disclaim the personal allowance in whole or in part. I put this to my MP at the time who was quite sympathetic, though she was a chartered accountant, but HM Treasury were not interested.

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