Charitable giving

If you are think­ing of mak­ing a gift to char­i­ty, this fact­sheet sum­maris­es how to make tax-effec­tive gifts. You can get tax relief on gifts to UK char­i­ties if you give:

• under Gift Aid
• through a Pay­roll Giv­ing scheme, run by your employ­er; or
• by mak­ing a gift of cer­tain shares or land.

Location of the charity

Char­i­ta­ble tax reliefs are avail­able on gifts to UK char­i­ties and Com­mu­ni­ty Ama­teur Sports Clubs (CASCs).

Gift Aid

If you pay tax, Gift Aid is a scheme by which you can give a sum of mon­ey to char­i­ty and the char­i­ty can nor­mal­ly reclaim basic rate tax on your gift from HMRC. That increas­es the val­ue of the gift you make to the char­i­ty. So for exam­ple, if you give £10 using Gift Aid that gift is worth £12.50 to the char­i­ty.

You can give any amount, large or small, reg­u­lar or one-off.

If you do not pay tax, you should not use Gift Aid.

How does a gift qualify for Gift Aid?

There are three main con­di­tions. You must:

• make a dec­la­ra­tion to the char­i­ty that you want your gift to be treat­ed as a Gift Aid dona­tion
• pay at least as much tax as the char­i­ties will reclaim on your gifts in the tax year in which you make them
• not receive exces­sive ben­e­fits in return for your gift (note that this rule also applies to per­sons con­nect­ed with you).

Making a declaration

The Gift Aid dec­la­ra­tion is the char­i­ty’s author­i­ty to reclaim tax from HMRC on your gift.

Usu­al­ly, the char­i­ty will pro­vide a writ­ten dec­la­ra­tion form — one form can cov­er every gift made to the same char­i­ty or CASC for what­ev­er peri­od you choose, and can cov­er gifts you have already made (back­dat­ing your claim for up to four years) and/or gifts you may make in the future.

Donor benefit rules

The donor ben­e­fit rules that apply to char­i­ties that claim Gift Aid are deter­mined by two per­cent­age thresh­olds:

• the ben­e­fit thresh­old for the first £100 of the dona­tion is 25% of the amount of the dona­tion; and
• for larg­er dona­tions, char­i­ties can offer an addi­tion­al ben­e­fit to donors up to 5% of the amount of the dona­tion that exceeds £100.

There is an over­rid­ing lim­it on the val­ue of ben­e­fits received by a donor in a tax year as a con­se­quence of dona­tions to a char­i­ty, which is £2,500.

You can pay mem­ber­ship sub­scrip­tions to a char­i­ty through Gift Aid, pro­vid­ed any mem­ber­ship ben­e­fits you receive do not exceed cer­tain lim­its. How­ev­er, you can dis­re­gard free or reduced entry to view any prop­er­ty pre­served, main­tained, kept or cre­at­ed by a char­i­ty in rela­tion to their char­i­ta­ble work.

Fundraising events

Where you have raised mon­ey which has sim­ply been col­lect­ed from oth­er peo­ple and the oth­er peo­ple have not made a dec­la­ra­tion to the char­i­ty that they are tax­pay­ers, the pay­ment is not made under Gift Aid and gen­er­al­ly no tax relief is due but see below regard­ing the Gift Aid Small Dona­tions Scheme.

How­ev­er, if you have been spon­sored for an event, and each spon­sor has signed a Gift Aid dec­la­ra­tion, then the char­i­ty can recov­er the tax on the amounts cov­ered by dec­la­ra­tions. Char­i­ties may pro­duce spon­sor­ship forms for this.

Higher rate and additional rate taxpayers

If you are a higher/additional rate tax­pay­er, you can claim tax relief on the dif­fer­ence between the basic rate and higher/additional rate of tax (through your tax return). Relief is giv­en either for the tax year of pay­ment or in some cas­es it is pos­si­ble to elect to receive the ben­e­fit of the higher/additional rate tax relief in the tax year pri­or to the year of the dona­tion.

You should there­fore keep a record of pay­ments made under Gift Aid for each tax year.

The time lim­it for claim­ing tax relief on Gift Aid dona­tions is four years. This time lim­it applies to the char­i­ty and the indi­vid­ual mak­ing the gift.

Tainted donations to charity

Tax relief is denied on dona­tions where one of the main pur­pos­es of the dona­tion is to receive a tax advan­tage for the donor or con­nect­ed per­son direct­ly or indi­rect­ly from the char­i­ty. There is no mon­e­tary lim­it on the amount of the dona­tion which may be caught by these rules.

Gift Aid Small Donations Scheme (GASDS)

Char­i­ties can use Char­i­ties Online for repay­ment of tax on oth­er income and claims for top-up pay­ments under the Gift Aid Small Dona­tions Scheme (GASDS).

Char­i­ties and CASCs can claim a top-up pay­ment on small dona­tions with­out the need to col­lect Gift Aid dec­la­ra­tions. The Gift Aid Small Dona­tions Scheme (GASDS) applies where it is imprac­ti­cal to obtain a Gift Aid dec­la­ra­tion. GASDS applies to dona­tions of £30 or less made by indi­vid­u­als in cash or con­tact­less pay­ment. Char­i­ties are gen­er­al­ly able to claim on small dona­tions of up to £8,000 per annum which will result in a repay­ment of £2,000 for the char­i­ty or CASC. The GASDS claim must not be more than ten times the Gift Aid claim.

The GASDS is ide­al for small cash dona­tions or con­tact­less pay­ments received in col­lec­tion box­es, buck­et col­lec­tions and dur­ing reli­gious ser­vices.

Payroll Giving

A Pay­roll Giv­ing scheme allows you to give reg­u­lar­ly to char­i­ty from your pay and get tax relief on your gifts. The scheme requires your employ­er to set up and run a scheme. You autho­rise your employ­er to deduct your gift from your pay. Every month your employ­er pays it over to a Pay­roll Giv­ing agency approved by HMRC. The agency then dis­trib­utes the mon­ey to the char­i­ty or char­i­ties of your choice.

Because your employ­er deducts your gift from your pay or pen­sion before PAYE is worked out, you pay tax only on the bal­ance. This means that you get your tax relief imme­di­ate­ly at your high­est rate of tax. The amount you pay in nation­al insur­ance con­tri­bu­tions is not affect­ed.

Gifts of shares or land

Capital gains tax (CGT)

You are not liable to CGT when you make a gift of assets, such as land or shares, to char­i­ty, even if the asset is worth more when you donate it than when you acquired it.

Income tax

You may also get income tax relief for these gifts to char­i­ty if they are ‘qual­i­fy­ing invest­ments’ (see below).

The relief you can claim will usu­al­ly be the mar­ket val­ue of the shares, secu­ri­ties or land plus any inci­den­tal costs of dis­pos­al less the val­ue of any con­sid­er­a­tion or ben­e­fits you receive.

Note cor­po­ra­tion tax relief is also avail­able for gifts of qual­i­fy­ing invest­ments to char­i­ty.

If you would like fur­ther advice on this mat­ter, please con­tact us.

Qualifying investments

In more detail, the fol­low­ing invest­ments qual­i­fy for the tax relief:

• shares and secu­ri­ties list­ed or dealt in on the UK Stock Exchange, includ­ing the Alter­na­tive Invest­ment Mar­ket
• shares or secu­ri­ties list­ed or dealt in on any over­seas recog­nised stock exchange
• units in an autho­rised unit trust (AUT)
• shares in a UK open-end­ed invest­ment com­pa­ny (OEIC)
• hold­ings in cer­tain for­eign col­lec­tive invest­ment schemes (for­eign equiv­a­lents of AUTs and OEICs)
• a qual­i­fy­ing inter­est in land.

You should always con­tact the char­i­ty to ensure that it can accept the shares or the land. Indeed for land, the char­i­ty needs to give you a cer­tifi­cate stat­ing that it has acquired the land.

The char­i­ty may be able to help you with the trans­fer pro­ce­dure.