Key Facts on how charitable donations to your faith centre can go further

In 2016 the Charity Commission reported a peak in charitable giving during the month of Ramadan, with £38 being donated by Muslims per second. In 2017 over £100 million was raised during this holy month. With Ramadan fast approaching it is a perfect time to make sure that your charitable organisation is maximising the value of donations.

Gift Aid is a scheme that enables registered charities to increase the donations they receive. Gift Aid reclaims the tax already paid on the money being donated, from HM Revenue and Custom (HMRC), for charitable causes. By claiming Gift Aid for you charitable organisation you can increase the value of the donations you receive by 25p to every £1, on donations up to £8000 per tax year.

There are several considerations to be mindful of when applying for Gift Aid. First, and foremost, gift aid can only be claimed on money that is being collected for a registered charity. Following from this, it is very important that religious institutions, and other organisations, collecting donations are well informed on the charity they are fundraising for. Finally, there are two ways that gift aid can be collected and understanding both of these options will ensure that you are not missing out on maximising all donations that are eligible for this scheme.

Defining what a charity ‘is’ is a complex, and sometimes controversial, topic. Officially, a charity is understood as an organisation that is set up for charitable purposes and provides public benefits. Acts of giving, which may be perceived as acts of charity, may not be legally regarded as such. Many of us are familiar with the sight of collection bowls being passed around at our local places of worship, or local community centres, to raise money for issues close to the hearts our communities.

The causes being collected for may go towards supporting a member of the community who is sick, or too fund projects that will benefit the immediate, wider, or global community. If this money is not being collected on behalf of a registered charity, however, than they will not be liable for gift aid.

Although those raising money often have the best intentions at heart, it is best to personally make sure the cause you plan to give money too is registered. The easiest way to do this is by checking for the charity registration number on The Charity Commission website.

Registered charities are eligible for two Gift Aid schemes:

Scheme 1: The main Gift Aid scheme allows eligible charities to claim 25p per £1 donated, on up £8000 per tax year, depending on eligibility. Click here for the application.

How to Apply:

Step 1: Apply to HMRC for recognition as a charity or a CASC for tax purposes.

If your Charity has income above £5000 you will have to register with the Charity Commission before applying to the HMRC.

Step 2: Nominate an authorised official and/or nominee.

Step 3: Fill in the R68(i) ‘Gift Aid and tax repayment claims’ form.

After you have completed these steps HMRC will confirm your status as a charity and issue a reference number that you will be required to state on all correspondence with them.

When collecting Gift Aid donations you will have to get a declaration from your donors, including their full name, address (including postcode), details of the donations covered by the declaration and confirmation that they are a UK taxpayer. One declaration can apply to all future donations from the donor.

Donations can be collected in face-to-face, over the internet, and by telephone, in any circumstance you should issue all donors with a declaration and make sure that this is signed.

You must keep either an electronic or paper record of the declarations, showing that your donors have agreed that you can reclaim the tax on their donation.

Scheme 2: The Gift Aid small Donations scheme (GASDS) allows eligible charities to claim ‘top-up’ payments on the small cash donations they receive. This means that charities don’t need the donor to complete an individual Gift Aid declaration to make a claim. In order to claim these donations, follow the steps below:

These small claims apply to amounts of £20 per individual donation or less. Most Faith Institution Charities may claim a top-up of £8000 per tax year, through this scheme, on cash that was collected after the 6th April 2017. Cash collected prior to this date are subject to different rules, which can be found on the HMRC website.

You are required to keep records of small donations as evidence of your claim. You should record: how much money was collected, including each denomination of coins and notes;

the date the money was collected;

that no individual donation was greater than £20;

if you’ve collected contactless donations you’ll need to keep the records produced by the contactless terminal.

You must claim on small cash donations within 2 years from the end of the tax year that you collected them, and give the total amount of the small donations when making your claim.

Have claimed main Gift Aid (see scheme 1) in the same tax year as you want to claim a top-up payment (scheme 2)

How to apply:

Step 1: Sign up to Charities Online to make a claim.

Step 2: activate your account using the activation code sent to you by Government Gateway, this usually take around a week to arrive and must be used within 28 days.

Step 3: Sign into your Charities Online account, and proceed to fill out the claims form:

Select ‘access service,’ then ‘make a charity repayment claim’ where you will specify that you are making a Gift Aid claim.

When you’ve filled in details of your claim, you’ll be asked for more information about your charity on a page titled ‘About the organisation’. 

  • You will then be asked to fill in the ‘repayment claim details’ page, where you can tell HMRC about the donations to your charity that you can reclaim tax on. You can send these details on a document called a schedule spreadsheet.
  • You will need to save this spreadsheet to your computer and attach it to the claims form.
  • You will be taken to the declaration page to finalise your form.
  • When you have submitted a claim, you will get an on-screen confirmation with the date and time it was sent. You will also see a reference number which you must make a note of and quote in any correspondence with HMRC regarding your claim.

For more information, click here for a guide to applying for the small donations scheme.

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