Gift Aid for a new charity
Charity Commission registration doesn't give you Gift Aid. Apply to HMRC for recognition before you run Gift Aid or claim charity tax exemptions. You need HMRC's charity reference before your first repayment claim.
Who applies when
| Your charity | Order |
|---|---|
| Must register with the Commission (CIOs at any income; others usually once annual income is over £5,000) | Register with the Commission first, then apply to HMRC with your charity number |
| Not a CIO, income under £5,000 | Apply straight to HMRC |
| Excepted or exempt from registration | Apply straight to HMRC |
| Refused by the Commission | You can still ask HMRC to consider you. It doesn't remove any legal duty to register |
| Sports club registered as a CASC | Not a charity. CASCs have their own tax reliefs, including Gift Aid |
The four conditions
- Charitable purposes only. Your purposes are exclusively charitable and for the public benefit, and your governing document limits all income and assets to them. The organisation must be established in the UK.
- Jurisdiction. Under the control of a UK court: the High Court in England and Wales.
- Registration. Registered with a charity regulator if the law requires it.
- Management. Its managers are fit and proper persons. That means trustees and anyone else with general control of the charity's administration, such as those controlling its money.
What to have ready
- bank account details and financial accounts
- officials' details, including dates of birth and National Insurance numbers
- your Charity Commission registration number, if registered
- your charitable purposes (objects)
- your governing document
- sign-in details for HMRC's online service, or create them as you apply
You name at least one authorised official, who deals with HMRC and signs claims, and at least two other officials with legal responsibility for running the charity. What to collect.
Fit and proper persons
HMRC assumes the people a charity appoints are fit and proper. It doesn't offer a clearance service. Its suggested routine, which is optional:
- Each new manager (trustees included) reads HMRC's helpsheet.
- They sign a declaration based on HMRC's model.
- You keep it while they're in post and for 4 years after they leave.
- You don't send it unless HMRC asks.
Following it lets the charity assume it meets the management condition. The exceptions: HMRC challenges it, or the charity knowingly appoints someone unfit to a role where they can influence its purposes or how its money is spent.
What Gift Aid is worth
Gift Aid lets the charity reclaim basic rate tax treated as deducted from an eligible donation. At a 20% basic rate, an eligible £30 gift brings £7.50: 25p for each £1. The donor must have paid enough UK Income Tax or Capital Gains Tax to cover it.
Gift Aid declarations
No set design, but a declaration must include:
- your charity's name
- the donor's full name and home address
- whether it covers past, present and future donations, or one donation
- a statement that the donor wants Gift Aid to apply (a tick box is fine)
- an explanation that the donor must pay at least as much UK Income Tax or Capital Gains Tax as all charities and CASCs will claim on their gifts that tax year, and is responsible for any difference
- HMRC publishes free templates for one-off, multiple and sponsored-event donations.
- Declarations can be backdated, and can cover future gifts.
- Verbal declarations work if you send a written confirmation with the same details, telling the donor they can cancel within 30 days of its date. Keep a record.
- Claim without a declaration and HMRC may ask for the tax back.
What doesn't qualify
Payments for goods, services or rights usually aren't gifts. HMRC's examples: buying jumble sale items, books or food; admission to events such as concerts; raffle and lottery tickets, including 100 clubs. Some membership subscriptions and admission to view charity property have special rules. Membership fees can't go through the small donations scheme. If the donor gets something back, the benefit must stay within HMRC's limits: 25% of a gift up to £100; above that, £25 plus 5% of the amount over £100, and the benefits from a donor's gifts to your charity in a tax year can't total more than £2,500. Benefits to people connected with the donor count too.
After HMRC says yes
HMRC writes with its decision and a charity tax reference, and explains how to claim. Claims go through Charities Online or paper form ChR1, with schedules of donors and donations.
Making a claim on Charities Online
- Register for HMRC Online Services as an organisation, choosing "charities". Enter your postcode, HMRC reference and either your customer account number or the last 4 digits of the charity's bank account.
- Note the 12-digit user ID shown on screen.
- An activation code arrives in around a week. Use it within 28 days.
- Start a repayment claim and attach HMRC's schedule spreadsheet: up to 1,000 Gift Aid donations per spreadsheet claim. Suitable Gift Aid software can file claims directly.
- Submit. Note the on-screen reference: it isn't confirmation of payment.
- Donations of £20 or less can be added together, up to £1,000 per entry. Keep the detail for your records.
- Sponsorship gifts under £500 can go in one entry per participant. List any gift of £500 or more separately.
- Unfinished claims are saved for 30 days.
Your HMRC reference looks like AB12345. Which number is which.
Time limits
| Rule | Detail |
|---|---|
| Gift Aid claims | Within 4 years of the end of the accounting period the donations relate to (tax year, for charitable trusts). Late claims aren't paid. |
| Small donations (GASDS) claims | Within 2 years of the end of the tax year you collected them. Keep records for 6 years from the end of the tax year they relate to. |
| Changes | Tell HMRC on form ChV1 about a new name, trustees, authorised official or bank account as soon as possible, and at least one month before you use the new details in a claim. |
Small donations without declarations (GASDS)
A top-up on cash and contactless gifts of £30 or less, with no Gift Aid declaration. Gifts that already have a valid declaration can't go through it.
- Ordinary limit: the lower of £8,000 of small donations a tax year, or 10 times your Gift Aid donations in that tax year. Community buildings and groups of connected charities have their own rules.
- At a 20% basic rate, £8,000 of small donations brings £2,000.
- You must claim Gift Aid on donations received in the same tax year as the small donations, and have had no Gift Aid or GASDS penalty in the current or previous tax year.
- Not for membership fees, or for £30 of a larger gift.
- Cash must be collected and banked in the UK. HMRC suggests two people check and count it, and records show no single gift was over £30.
Example: £100 of Gift Aid donations supports a claim on up to £1,000 of small donations, a £250 top-up.
Records
Keep every declaration, and an audit trail linking each donation to its donor and declaration. Donors can cancel a continuing declaration: record the date and stop claiming on later gifts. Only gifts of an individual's own money qualify; company donations are paid gross with no tax to reclaim.