Information for congregations wishing to claim Gift Aid.
Gift Aid is a government scheme which allows a congregation, as a registered charity, to claim 25p from HMRC every time an individual donates £1. The donor must have made a Gift Aid declaration giving the congregation permission to claim on their offerings and donations.
The donor must be a UK tax payer and have paid as much or more income tax and/or capital gains tax in the tax year than will be reclaimed through Gift Aid on their donations. Whilst the responsibility for this lies with the donor, not the congregation, it is good to periodically remind those who have signed a Gift Aid declaration to check that they are still paying enough tax.
[If the donor has not made a declaration, the congregation may still be able to claim on chip and pin/contactless terminal and cash donations of £30 or less through the Gift Aid Small Donations Scheme (GASDS). Information on that Scheme can be found on our website.]
If a congregation receives annual offerings or donations of £10,000 which are eligible for Gift Aid, the congregation will receive a tax refund of £2,500. Similarly, on £50,000 of donations the refund will be £12,500.
Claiming Gift Aid
Claims for Gift Aid can be made using HMRC’s charities online service. This link sets out both the registration and claims processes in detail.
Alternatively, claims can be made by post after obtaining a ChR1 form by contacting HMRC’s charities helpline.
The online process provides a Gift Aid donation schedule spreadsheet where up to 1,000 donations can be claimed at one time. Additional spreadsheets can be submitted where the number of donations exceeds 1,000. This spreadsheet will require either Microsoft Excel (Microsoft Office 2010) or LibreOffice to be installed on your computer.
Online claims can also be made using suitable software. HMRC’s website has a list of eligible commercial software suppliers.
If your claim is accepted, your congregation should be paid by bank transfer within four weeks for online claims or five weeks for postal claims. HMRC will send written confirmation that a payment has been made.
Counting up and recording envelope giving
When counting up the offering after a service, please write on the outside of each envelope the sum contained within that envelope and keep all of the envelopes as a record. In Gift Aid audits, problems are most often found to occur at the counting-up stage.
Here are some pointers to ensure that this process is handled in line with good financial practice:
- Offerings should be counted on the premises immediately following the service
- At least two people should count
- Those counting should not be related or live in the same household
- Gift Aid envelopes, non-Gift Aid envelopes and loose cash should be separated
- Loose cash should be counted by the first person, checked by the second person and the amount noted. The cash should then be set to one side whilst the envelopes are dealt with.
- Each envelope should be opened and the amount contained within it then written on the envelope and checked by the second person
- When all envelopes have been opened, the total cash and cheques from the envelopes on the table should be counted and should match the totals on the envelopes
- The total of the donations should then be recorded. A template document is available to download.
- The envelopes (with amounts written on) plus a note of the totals should be passed to the Gift Aid Convener, who then records the amounts on a donor record spreadsheet.
Gift Aid Declarations
To claim Gift Aid, the congregation will need a Gift Aid declaration from the donor. A declaration can be made in writing, including by text message, verbally or online. Whichever format is used, the following information must be included for the Gift Aid claim to be valid:
- The name of the congregation (the charity)
- The donor’s full name
- The donor’s home address including postcode
- Whether the declaration covers past, present or future donations or just a single donation
- A statement that the donor wants Gift Aid to apply (this could be a tick box on a written or online declaration)
- An explanation that the donor needs to pay the same amount or more of UK Income Tax and/or Capital Gains Tax in the tax year and that the donor is responsible to pay any difference.
A declaration can cover a single one-off donation, in which case the date and the amount of the donation is usually included on the form, or can apply to all future donations made by the donor. This is called an ‘enduring declaration’ and is clearly the best option for regular givers to our congregations. A declaration can also give permission to claim on donations made by the donor in the previous four years.
If a verbal declaration can be recorded that is all that is necessary. However, if not then the declaration won’t be valid until the donor is sent a written record of all the details provided or confirmed by them. This must include the statutory information that is required on a written declaration as well as an explanation of their entitlement to cancel the declaration within 30 days, the date on which the donor gave the verbal declaration and the date on which the congregation sent the written record to the donor.
Married couples, couples in a civil partnership or people living at the same address can make declarations on the same form providing they are all tax payers. Each donor must, however, be listed separately on the congregation’s claim to HMRC.
Technically, HMRC does not require Gift Aid declarations to be signed or dated by the donor, but it is a good idea to include these for the purposes of a complete audit trail.
A downloadable information leaflet for donors containing a declaration form is available, along with an easy print declaration form. These contain HMRC recommended wording (which came into effect in April 2016) and an appropriate privacy notice. Previously completed declarations containing the out-of-date wording do not require to be renewed, but any new declarations should be in line with the current recommended wording.
If a donor changes their name or address, they do not need to complete a new declaration but a note of the updated details must be kept along with the original declaration. Likewise, if a congregation changes its name, for example after a union, there is no need for all existing declarations to be renewed if it can be shown beyond doubt that the name on the existing declarations is a name previously used by the congregation.
Gift Aid Envelopes
Offering envelopes can be used in relation to Gift Aid donations in two ways:
Firstly, you can issue envelopes to regular givers and donors. These envelopes will usually incorporate a reference linking the donation to the donor for whom there is a separate Gift Aid declaration. Such envelopes may also contain a printed date for each week or month. This can encourage more regular offerings, even when an individual is not able to attend on a given Sunday.
Secondly, you can make available envelopes which incorporate a Gift Aid declaration form. These envelopes are often used for one-off donations. These envelopes must be retained for six years after the end of the accounting period in which the donation was made.
For audit purposes, the congregation is advised to keep a representative sample of used envelopes given during a period of at least one month per year for four years, including envelopes used for donations not eligible for Gift Aid. For example, a church may decide to keep every general giving envelope received throughout the month of August each year. After a period of four years, the church will hold four months’ envelopes, all received during August for the preceding four years. This would continue on a rolling basis.
Most Gift Aid envelope suppliers can also provide weekly recording systems to help a Treasurer or Gift Aid Convener with record-keeping.
Dated envelopes may, of course, be used by non-Gift Aid donors to help maintain regular giving habits. It is important, however, to keep track of which numbered envelopes are eligible for Gift-Aid and which are not. Some congregations use different coloured envelopes to distinguish between the two categories.
Please continue to encourage regular givers to give by monthly or weekly standing order from their bank account rather than through weekly envelopes. Standing orders save time, money and trees, and lead to more reliable income and consistent cash-flow. Offerings given by standing order are eligible for Gift Aid, subject to the usual parameters of the scheme. A downloadable standing order form is available.
Higher-rate tax payers
Churches and other charities can only reclaim the basic rate of tax on Gift Aided donations, no matter whether the donor pays basic-rate or higher-rate tax. However, HMRC allows higher-rate tax payers to reclaim the difference between basic and higher-rate tax themselves. HMRC guidance on tax relief for such donors is available on the UK Government's website.
Higher-rate tax payers may, of course, choose to increase their giving upfront to take account of this tax relief or donate the reclaimed amount retrospectively. In the case of the latter, Gift Aid can be reclaimed by the congregation on those additional donations too.
If your congregation is audited by HMRC, it will need to be able to prove that there is a valid declaration for all donations on which the congregation has reclaimed tax. It is vital, therefore, to ensure that Gift Aid declarations are valid and kept safely. Each declaration, whether written, online or verbal, must be kept for six years following the most recent associated eligible donation.
If Gift Aid is claimed on payments from a donor who has not made a Gift Aid declaration, the congregation will have to repay the tax claimed. If a charity does not keep adequate records, it may be required to pay back to HMRC the tax reclaimed with interest. It may also be liable to a penalty under the self-assessment rules.
Original paper declarations can be scanned and stored electronically, providing that the scanned images can be viewed and printed at a later date if required. Where scanned images are kept, the original paper forms can be destroyed.
Records of verbal declarations
To keep a record of verbal declarations from donors, you can:
- Keep an audio recording of each donor making their Gift Aid declaration
- Keep a record of when the letter confirming a donor’s verbal declaration was issued.
You must keep records of any cancelled declarations, including the cancellation date. A donor can cancel their declaration at any time. This will not affect donations already made but any further donations from that donor will not qualify for Gift Aid.
Offering envelopes often incorporate a reference that links a named donor to an ‘enduring declaration’ covering all donations to the congregation. In such circumstances, the congregation is advised to keep a minimum of one month’s envelopes per tax year, covering a period of four years. For example, a church may decide to keep every general giving envelope received throughout the month of August. After a period of four years the church will have in place a total four months’ envelopes, all received during August for the preceding four years. If the offering envelopes incorporate the Gift Aid declaration itself, then those envelopes must be retained for the longer six year period as outlined at the start of this section.
Chapter 7 of HMRC’s guidance for charities provides more detail on these audit matters.
Recent updated guidance from HMRC
HMRC will consider donations made from a waiver of a right to either a refund or loan repayment to be eligible for Gift Aid. For example, if someone had bought tickets for the congregation’s fundraising event and the event was subsequently cancelled but the individual stated they did not wish a refund, this could become a donation eligible for Gift Aid.
Similarly, if someone had loaned the congregation money but then later decided to write off the remainder of the loan, then what was left of the loan could become a donation eligible for Gift Aid.
In both scenarios, the money can only be treated as a Gift Aid donation if there is a record of a formal waiver held by the congregation, the donor is a UK tax payer and all other Gift Aid rules are met. The donation will be considered to have been made at the date of the waiver and not the date of the original payment.
What HMRC considers to be a formal waiver depends on the amount being waived. For a small amount, an email, letter or recorded phone call is sufficient. However, for a larger amount, such as a cancelled loan, a legally enforceable document is required. The congregation must keep a copy of all documents for audit purposes.
Gift Aid claims require to be submitted within four years of the end of the accounting period in which the donation was received. So, for example, Gift Aid donations made in the accounting year ending 31 December 2018 require to be claimed by 31 December 2022.
[The time limit for the submission of claims under GASDS is two years from the end of the tax year in which the donations were received.]
More detailed guidance on the Gift Aid scheme can be found on HMRC's website.
Another source of relevant information is the Charity Tax Group's website.