Ian Gledhill HMRC (Charities)

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Ian GledhillHMRC (Charities)
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Gift Aid Repayment claims

• 2000/2001
• 25,100 Charities claimed 221.5 million

• 2004/2005
• 60,329 Charities claimed 651.1 million

• 2008/2009
• 75,000 Charities claiming 990 million

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Gift Aid Requirements

• There are 4 main requirements for Gift Aid
• Donations (a sum of money) must be made to a UK
  Charity or CASC.
• Donations must be from a UK taxpayer
  (individual).
• Charity / CASC must hold a valid declaration.
• Charity / CASC must be able to show receipt of
  donation.

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Requirement 1 UK Charity / CASC

• Charity usually registered with Charity
  Commission (England Wales).
• If not, may still be able to apply to HMRC.
• CASCs must register with HMRC.

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Requirement 2 Individual UK Tax payer

• Individual must
• be a UK taxpayer, and
• have paid sufficient tax to cover the claim made
  to HMRC (Charities)

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Tax to cover example
Individuals donation
1,000
Charity claims
250
Donors tax - minimum
250
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Reduction in the Basic Rate of Income Tax

• From 6 April 2008 the Basic Rate of Income tax
  was reduced from 22 to 20
• Tax claimed by charities on every 1 donation was
  reduced from 28.2p to 25p
• Government will give 2 transitional relief for 3
  years from 6 April 2008 to 5 April 2011.

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That tax can be

• Basic rate (currently 20)
• 20 rate (rate deducted by Banks/Building
  Societies)
• 10 rate (non repayable tax deducted from
  dividend payments)
• Capital Gains Tax

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Requirement 3 - Gift Aid declaration

• Declaration must contain
• Name of charity
• Name of donor
• Donors home address
• Description of payment(s)
• Declaration that payment(s) are Gift Aided
• Note explaining that the individual must have
  paid sufficient UK income or capital gains tax to
  cover the claim

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Gift Aid declaration

• Declaration must contain
• Name of donor
• Ideally, we would like to see- Mr John Smith
• We will however accept the following
  combinations-
• John Smith J Smith Mr J Smith.
• We will not accept-
• Mr Smith Smith John

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Gift Aid declaration

• Declaration must contain
• Donors residential address

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Addresses on GADs (i)
YES ?

• 11, HD8 9QA or Dunroamin, HD8 9QA
• 11, Park Street, Goole, HD8 9QA
• 11, Park Street, Goole
• 11, Park Street, HD8 9QA

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Addresses on GADs (ii)
NO

• 11, HD8.
• Park Street, Goole, HD8 9QA
• 11 Park Street.
• c/o Yates Wine Bar, Park St, Goole

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Retention of Declarations

• Should be kept for a period of 6 years after the
  last donation (being looked at as part of the
  budget announcement)
• Must be available for inspection
• Can be retained as a scanned document

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Requirement 4 - Audit trail
Audit trail from each Donor
Through the Charitys books records
and then into the Charitys Bank account
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Sample Records - Donor register
Mark Toner ? 14/8/2000 5 cash cash book
Eve Powell ? 5/9/2000 10 cheque banked 14/9
Mike Keller 6/9/2000 7.50 cash cash book
Andrew Kayley ? 15/9/2000 4 cash cash book
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Sample records - Church envelope register
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Cheque payments

• Name of payer to be shown in Bank paying in book
• List separately if there are a large number of
  payments

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Particular SituationsOther Fundraising
EventsThings To Look Out For HMRC Audit
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Sponsorship Gift Aid

• Charity The HMRC Auditors Benevolent Fund Name
  of Participant Ian Gledhill
• Event The 2009 Barnsley Marathon

you must pay an amount of UK income tax and/or
capital gains tax at least equal to the tax that
the charity reclaims for donation
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Sponsorship (And Aggregated Claims) Gift Aid
claim simplified procedure
Participant Date of Payment Total Donation
Received
Stan Smith 19/05/09 50.00
Ian Gledhill 21/05/09 39.00
Jane Brown 28/05/09 72.00
R68(NGA)
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Adventure Fundraisingin the UK

• Parachute Jump
• Abseil down a tall building
• 3 peaks in 24 hours
• Walk the Pennine Way
• Swansea to Dublin Bike Ride
• All have possible benefits for the participant
  that affect Gift Aid

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What is a benefit?

• any item or service
• provided by the charity or a third party
• to the donor or a person connected with the donor
• as a consequence of making the donation

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Gift Aid benefit limitsSection (5A) Finance Act
1990
Amount of donation Value of Benefits
0 - 100 25 of the donation
101 - 1,000 25
1,001 - 10,000 5 of the donation
Note Maximum limit for a series of benefits
given to a donor is 500 per tax year (w.e.f
6/4/07)
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Membership Subscriptions

• Membership subscriptions are not Gifts
• Prior to 6 April 2000 paid under Deed of Covenant
• HMRC will accept Membership subs as gifts if
• 1. The payment does no more than secure
  membership of the Charity.
• 2. The payment does not secure a right to
  personal use of any facilities or services
  provided by the Charity.

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Membership Subscriptions

• Family Memberships can be Gift Aided - provided
  the subscription includes membership for the
  donor
• Paying other peoples membership cannot be Gift
  Aided because although payment is to the Charity
  - Gift is to made to the member whose
  subscription has been paid.
• Periodic Newsletters, attending meetings and
  visiting the work of the Charity - not benefits

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Donations attracting right of free admission

• Statutory relaxation in donor benefit rules to
  view property preserved, maintained kept or
  created by a charity
• Must be in pursuance of its charitable purposes
• The right of admission applies to the donor and
  one or more members of family

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Donations attracting right of free admission

• Donation must be at least 10 more than the
  normal admission charge(s)
• Or
• Donation allows the right of admission for a
  period of at least one year.

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NOT Gifts

• The purchase of books, jumble sale items, bedding
  plants, food, alcohol etc
• Admission to events e.g. concerts, recitals etc.
• Golfing fees, Day Trips, Transport etc.
• Fees to adopt / re-home an animal
• Raffles, lottery tickets 200 Clubs
• Hire of own premises

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How does HMRC decide who to audit?

• Risk Assessment process
• Problems seen in claims submitted by charity
• Rapid rise in claims made by a charity
• No previous audit by HMRC of claims made
• Information from staff in HMRC about a charity
• Information from the public / in the press with
  concerns about a charitys Gift Aid claims

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What records are required by HMRC?

• Blank Gift Aid declaration form(s)
• Appeal leaflets, membership forms, appeal
  leaflets
• The selected Gift Aid declarations Sponsorship
  forms (paper or scanned images)
• Account records - Audit trails
• Banking records, Paying-in book, Bank statements,
  donation envelopes etc.

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What will the auditor be looking for?

• A valid GAD is held for every donor on the claim
  or in the sample selected
• Donations comply with the legislation are they
  all Gifts?
• That any benefits given to donors do not exceed
  the statutory limits
• Audit trails exist to confirm that the donor has
  made the payments claimed on

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Prevention is better than cure

• HMRC can help in the auditing testing of new
  systems and procedures
• HMRC can audit claims prior to repayment
• Charities should carry out own assurance checks
  on claims
• HMRC can assist charities who identify a problem
  with their claims
• Explain Gift Aid to fund-raising staff,
  Treasurers etc.

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What happens when the audit is finished?

• A summary meeting will be held and the results of
  the HMRC review will be explained
• Advice will be given to charity on what changes
  to systems procedures could be made
• The potential financial consequences for the
  charity will be explained
• A letter confirming the findings of the audit
  will be sent to appropriate charity official

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Most Common Errors

• No declaration held by charity
• No evidence of receipt of donation
• Payment not received from an Individual
• Payment not a Gift

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Time Limits for claiming Gift Aid

• A charity which is a Trust for tax purposes must
  make any claim within 5 years of the 31 January
  in the year following the end of the tax year to
  which the claim relates.
• A charity which is a Company for tax purposes
  must make any claim within 6 years from the end
  of the accounting period to which the claim
  relates.

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Time Limits for claiming Gift Aid From April
2010

• A charity which is a Trust for tax purposes must
  make any claim within 4 years of the end of the
  tax year to which the claim relates.
• A charity which is a Company for tax purposes
  must make any claim within 4 years from the end
  of the accounting period to which the claim
  relates.

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Further Advice

• Telephone

08453 02 02 03 HMRC (Charities) Help Line Gift
Aid, Charity Tax returns, VAT queries, Trading
Community Amateur Sports Clubs (CASCs)
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Website

• www.hmrc.gov.uk

E-mail
Charities_at_hmrc.gov.uk
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Any Questions?
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Ian GledhillHMRC (Charities)