How to claim Gift Aid for your group

Add 25% to the value of donations to your group, under the Gift Aid scheme.

This guidance covers:

  1. What is Gift Aid and why is it worth doing?
  2. How to register for Gift Aid with HMRC
  3. What types of income qualify for Gift Aid?
  4. Gift Aid declarations and other information to collect and keep
  5. How to compile and submit a claim

 

  1. What is Gift Aid and why is it worth doing

What is Gift Aid?

Gift Aid allows charities to claim an extra 25p for every £1 an individual donates.

Effectively, HMRC repays the tax paid by a UK taxpayer before the donation is made.

A donor must not pay less Income Tax and/or Capital Gains Tax than the amount of Gift Aid claimed on all their donations (not just ones made to your charity) in that tax year. Otherwise, they will be liable to, and responsible for, repaying any difference to HMRC.

Why it is worth doing - an example

For all taxpayers: if someone donates £10, your charity can reclaim a further £2.50 from HMRC (the individual will have had to earn £12.50 to donate £10, assuming basic rate tax of 20%). Equivalently, for your group to receive £100, an individual donor must give £80, and you will reclaim £20.

For higher rate taxpayers, your charity has a better argument. If an individual donates £10, your group reclaims £2.50; and the taxpayer reclaims another £2.50 from HMRC on their self-assessment tax return at the end of the tax year (the difference between the basic rate tax which the charity reclaims and the 40% higher rate). It costs the donor only £7.50 to enable your group to receive £12.50.  Equivalently, for your group to receive £100, it would cost a higher rate taxpayer only £60.

For additional rate taxpayers (45%), income tax relief increases to 25%, costing a donor £55 for the charity to receive £100.

And for very high earners, Gift Aid donations may be used to extend the threshold before they lose their tax-free personal allowance.

Make sure your higher rate donors are aware of these extra benefits. It may encourage them to give more.

Gift Aid across the UK

Gift Aid can be claimed by UK charities. This includes charities registered with the Charity Commission or OSCR (Scotland) and also charities that are too small to register. These charities can still get recognition as a charity from HMRC and claim Gift Aid.

The Welsh government and Scottish parliament can set their own income tax rates for their taxpayers. However, HMRC collects income tax throughout the UK.

In relation to Gift Aid, this means charities in Wales and Scotland will still be able to claim tax at the UK basic rate (i.e., the rate applicable in England and Northern Ireland) and so will get the same amount of Gift Aid as charities elsewhere in the UK.

If the basic rate in Wales or Scotland is different from the UK rate, the taxpayer's tax will be adjusted to allow for the amount of relief provided to the charity. Higher or additional rate taxpayers will be able to claim tax relief on the difference between the UK basic rate and the Scottish/Welsh higher or additional rate.

  1. How to register for Gift Aid with HMRC

You will need to register your group with HMRC before you can claim Gift Aid.

HMRC recognition and registration

In order to claim Gift Aid you will need to be recognised as a charity with HMRC but do not have to be registered with the Charity Commission or OSCR, hold a charity registration number. This means you can still claim Gift Aid if you have a charitable constitution but are unable to register with the Charity Commission because your income is below £5,000 a year. If you are unsure about your charitable status please contact us.

You can apply for recognition as a charity by using HMRC’s online service or by completing form ChA1.    

In order to register with HMRC you will need your charity’s:

If you apply for recognition/registration online, you will be required to set up a Government Gateway account.  You can do this by selecting ‘Create sign in details’ when asked to ‘Sign in using Government Gateway’.  You will be prompted to select a password and will be given a unique 12-digit User ID. Make a record of both this User ID and the password you have selected, as you will need them to log in and make claims.

You should decide in advance who in your organisation is authorised to hold these details and submit a claim.

Changes to your organisations details or signatories can be made on form ChV1.

Before you can claim

In order to claim Gift Aid online, you will need to add Charities Online to your Government Gateway account.

To do this you will need to log into using your Government Gateway User ID and password. If you set these up under Step 1, you can use the same details.  If you did not, for example because your application for HMRC recognition was made by post, you need to set one up by clicking on ‘Create sign in details’, taking a note of the User ID and password you set up.

Once logged in, you can add Gift Aid to your account under ‘add a tax, duty, or scheme’ by selecting ‘Other tax or scheme’ and then ‘Charities – for Gift Aid repayment claims’.

Once the registration process is complete, you will receive an activation code in the post.  This normally takes around a week to arrive and is valid for 28 days.

When you have this code, you need to use it activate your account by logging in to HMRC Online Services using the user ID and password you set up earlier.  Under ‘Charities’ (which should be listed as one of the ‘services you can use’) you then need to:

  • select ‘activate service’
  • enter the activation code
  • select ‘activate’.
  1. What types of income qualify for Gift Aid?

In general, donations must be made:

  • from individuals
  • in monetary form
  • without benefit to the donor in return
  • by a UK taxpayer (not necessarily resident in the UK), paying at least as much income tax or capital gains tax in that tax year as the Gift Aid to be claimed
  • accompanied by a Gift Aid declaration giving permission to claim

Donations to a charity by individuals

Any monetary donation to a charity from a UK taxpayer is potentially eligible for Gift Aid.

All that is required to claim the relief is information showing who has given, how much and a declaration that the donor wants the tax to be reclaimed (which can be a written document, or a record of a declaration made in person, by phone, text, email or online form).

Gift Aid declarations can be retrospective to cover the preceding four years; there is no minimum donation to qualify for tax relief; and donors do not have to agree to go on giving money for a fixed period of time. The only limit on the size of the donations is set by individuals' total UK tax liability - tax relief cannot be reclaimed that is greater than the total income tax and capital gains tax they are liable to pay.

Donations to a registered charity by companies

Charities cannot claim Gift Aid on donations from companies. A company making a monetary gift to a charity pays the gross amount of the donation to the charity and receives a deduction from its own corporation tax liability.

Eligible donations

Donors must donate their own money. A claim cannot be made if a donation represents a collection from a group of people.

A charity must not make claims under the Gift Aid Scheme in respect of payments which have already received tax relief. This includes payments received in the form of charity voucher (e.g., CAF voucher), from a Payroll Giving Agency in respect of payments made under the Payroll Giving Scheme, or through an intermediary claiming Gift Aid on the charity’s behalf (e.g., JustGiving). The collecting organisation will be able to advise you on the Gift Aid status of the donations made through them.

With two exceptions, Gift Aid is only available for monetary donations, such as donations made in cash, by cheque, direct debit, standing order or bank transfer. Donations of other assets and gifts in kind do not qualify for Gift Aid.

Exception 1 – Refund waivers

HMRC allows Gift Aid to be eligible on any refund donated to charities in lieu of cancelled tickets or debts not to be collected. If an event is cancelled (not postponed), your group can claim Gift Aid on the value of a waived ticket refund if the ticketholder agrees to turn this into a donation. Assuming the following conditions are met you can keep the value of the ticket instead of issuing a refund, and then claim Gift Aid on the ticket price:

The individual agrees that the cost of their ticket becomes a non-refundable donation, and the charity keeps a record of this agreement

The individual does not receive a benefit as a result of their donation

The individual completes a Gift Aid declaration

Exception 2 – Retail Gift Aid Scheme

The Retail Gift Aid Scheme allows charity shops to obtain Gift Aid on the sale of donated goods.  

Contactless Card Donations

Donations made by contactless card methods (e.g., Goodbox, Zettle) may be eligible for Gift Aid if they can be linked directly to an individual donor (e.g. if a terminal offers the ability to create a Gift Aid declaration, or if both the donor and charity are registered with SwiftAid).

Alternatively, contactless card donations of £30 or less may be eligible for Gift Aid through the Gift Aid small donations scheme (GASDS).

Gift Aid Small Donations Scheme (GASDS)

The GASDS allows charities to claim Gift Aid on small donations of £30 or less without requiring the donor to provide a Gift Aid declaration or to have paid sufficient UK tax. This includes donations from a bucket shake or, since 6 April 2019, on contactless card donations.

There are conditions to the scheme:

  • You must have been registered as a charity for tax purposes for at least the previous two complete tax years
  • You must make a successful Gift Aid claim in the tax year
  • You must not have incurred any Gift Aid penalties in the current or previous tax year
  • You must claim within 2 years of the end of the tax year that the donations were collected in
  • GASDS claims must be made through Charities Online, not on paper forms
  • The donation must not have had any benefits associated with it. Although something like a sticker to acknowledge a donation would be fine
  • The identity of the donor must not be known (so cheques are not eligible). If the identity of the donor is known, then a valid Gift Aid declaration must be sought, and Gift Aid claimed through the usual method.
  • GASDS should not be used for collecting member subscriptions
  • The maximum amount of GASDS payment you can claim is capped at the lower of £8,000 or 10 times the amount you receive in Gift Aid donations in that tax year (known as the matching rule). This means the maximum amount claimable in the year is £2,000. Example:
    • If you claim £400 in Gift Aid you claim top-up payments on £4,000 worth of small donations - this would work out at a £1,000 payment under GASDS
    • If you claim £1,100 in Gift Aid you could claim on £8,000 worth of small donations - which would work out at a £2,000 payment.

You can find more information about the GASDS on the HMRC website.

Donor benefits

The general principal is that donations must be freely given without the donor (or a person connected to them) expecting anything in return.

There are limits on any benefits a donor can receive before the payment ceases to be considered a donation.

Acknowledgments, such as a simple thank in your programme, would not count as a benefit but where benefits are an item or service, for example a free CD or free entry to an event, that would not count as a donation. Promotional charity literature, such as newsletters, annual reports, journals, members’ handbooks and programmes of events are generally considered to carry no benefit.

If the value of a benefit does not exceed the limits below you can still claim Gift Aid on a donation. The value is the value to the donor, not the cost to your group – so the value would be the retail/commercial cost of the CD or event ticket.

Donation Amount

Maximum value of benefit

Less than £100

25% of donation amount

Over £101

£25 plus 5% of anything over £100, up to a maximum value benefit of £2,500

If the benefit is attendance at an event that is not open to the public (so there is no ticket price), the value of the benefit should be calculated with reference to the cost of the event to you and the number of guests. 

If several donations and benefits are linked, they may have to be treated as one.

Splitting a payment into a donation element

It may be possible to split a payment between a donation and a payment for a benefit. Several conditions must be met before Gift Aid can be claimed on the donation element:

  • The benefit must be available for purchase by members of the public who choose not to donate
  • At the time of making the donation, the donor is aware of the value of the benefit they will receive
  • You must keep evidence of supplying this information and document the calculations for valuing the benefit element.

It may be simpler to request separate payments for donations and other services.

For more about valuing donor benefits, see the HMRC website

Please note that this guidance about benefits applies to donations only and distinct from the advice about membership subscriptions below.

Membership subscriptions

Although membership subscriptions are not donations, there are some circumstances in which they can be considered eligible for Gift Aid by HMRC. This is a concession which focuses on charities achieving their charitable objectives.

The conditions attaching to the concession are that the membership subscriptions:

  • do no more than secure membership of the charity: and
  • do not secure a right to personal use of any facilities or services provided by the charity.

Having consulted with HMRC, we can advise that they regard rehearsal costs of a performing group (ie a vocal or instrumental group whose members participate in music making) as a charitable expense incurred by the group, and that they do not represent a tangible benefit to the individual members of the group. Hence the group may treat subscription payments from members in the same way as a donation for the purposes of reclaiming tax on behalf of those members, assuming they have paid tax at the appropriate rate and are prepared to sign a Gift Aid declaration.

Tuition, on the other hand, is considered to be a use of facilities or services, and as such, if a subscription includes a payment for any tuition the subscription will not qualify for Gift Aid treatment under the concession to that extent because it fails to meet condition (ii) above.

HMRC has asked us to advise members to take a closer look at the issue of tuition in their activities, to ensure that any costs associated with the provision of tuition are separated from what is classified as the membership subscription, and not included in any Gift Aid claims. See 'Assessing membership subscriptions for Gift Aid eligibility' below.

It is difficult to think of any other possible ‘benefits’ a member may receive in return for their subscription, but groups should bear in mind the benefit rules when arranging ticket deals for members (see next paragraph) and eg if arranging trips for members.

Music club; Payments for season tickets are not eligible for Gift Aid. However, if members wished to make a voluntary donation in excess of the purchase price of the season ticket then Gift Aid may apply to the excess providing: 

  • they are not required to pay a set amount
  • provision of the season ticket is not dependent upon the individual making a donation
  • all the other requirements of the Gift Aid scheme are met i.e. Benefit rules, Gift Aid Declaration

Educational establishments such as summer schools cannot Gift Aid their subscriptions where the benefit is tuition and where tuition is paid for (any payment whether or not tuition is provided isn’t a gift to the charity but a payment for goods or services namely attendance at the event/summers school). Even if tuition is received free of charge the members receive a benefit equal to the commercial cost of an MD providing tuition and if this as a consequence of Membership it is a benefit which would need to be taken into account for Gift Aid purposes.

Assessing membership subscriptions for Gift Aid eligibility

It is impossible to give blanket guidance on this subject since the issue of tuition is open to interpretation. Making Music member organisations operate in different ways in pursuing their charitable objects: some will inevitably consider that rehearsals preparing their members for a public performance are effectively providing tuition to those individuals; whilst others may regard the rehearsal period prior to a concert simply as a means of preparation towards an artistic interpretation and therefore their participants are not receiving tuition in order to do this but are already fully formed in their capabilities. It is important that members take a considered view in their own organisations as to what extent members benefit from an element of tuition.

HMRC has asked Making Music to help ensure that members are aware of the rules regarding Gift Aid claims and of how to calculate the eligibility of member subscriptions within the scheme.

Here are some guidelines for assessing to what extent your activities enable your membership subscriptions to qualify for Gift Aid under the concession, and what should be excluded:

1. With your committee and conductor/Music Director you should review your activities, particularly rehearsals, and take a view on to what extent they constitute tuition. For example:

  • What is the typical personal journey for members between beginning a new piece of music and performing it?
  • How much of the Music Director’s approach is about teaching or training members and equipping them with the right skills or understanding to be able to perform the music before them?
  • Do members learn how to sing or play, and are they enhancing their ability to do so as a direct result of participating in rehearsals?
  • Is part of your rehearsal process to be led by your music director or conductor note by note in order to learn your respective parts?

We advise that rehearsal practice which involves the choir being taken through the music in detail, eg in order for members of the choir to learn their parts, is usually treated as involving an element of tuition, although each case needs to be decided upon its own particular facts.

2. If you have identified an element of the rehearsal provision which you consider to be tuition to members, you now need to assess what proportion of your costs  (e.g. the fee of the  Music Director, or part thereof) is attributable to tuition.

Members will then need to pay a corresponding tuition fee which covers this tuition cost, separate from their membership subscription. Members may still make a single payment to your organisation, so long as they are clear about how this is divided into a membership subscription and a tuition fee. The membership subscription should then include only those benefits such as rehearsal facilities which contribute towards the organisation meeting its charitable objectives. Such a membership subscription can then be considered as the qualifying total for Gift Aid purposes under the concession.

NB Even if you decide that all of your Music Director’s fees are incurred in the provision of tuition, it will be likely that other costs associated with your activities (eg. rehearsal venue hire, refreshments, accompanist, music hire, etc) will not be considered as the provision of personal benefits by HMRC and will therefore not prevent a portion of the payment you receive from members from satisfying the terms of the concession.

Please note

  1. You must ensure that you calculate the amounts that do and do not qualify for Gift Aid in advance of the membership year in question, and not afterwards.
  2. The calculation must be based on known fixed costs where possible. Any required cost estimates should be based on the previous years cost in the absence of a more accurate indicator.
  3. In the unlikely event that the amount collected from the individual member in payment of non-qualifying subscription fees is higher than that originally advised to the member in advance, any amount over and above the original advised amount cannot be considered eligible for Gift Aid.
  4. Payments from members should be separated into a general membership subscription, which is eligible for Gift Aid, and a tuition fee, which is not. In this way the fees are clearly separate, and it is clear to the member in advance what they are paying for and what is and is not eligible. Members may continue to make a single payment for the total.
  5. Payments made by an individual for somebody else's membership do not qualify for Gift Aid, for example where an individual pays for the annual membership subscription of his or her spouse. The payment will qualify if it is made by a parent or legal guardian on behalf of a child under the age of 18, or if it is for a family membership that includes the donor.
  6. Because membership subscriptions are not gifts, and HMRC makes a concession to consider them eligible for Gift Aid, any payments will, of course, still have to satisfy the benefit rules described above and in more detail on the HMRC website.

Example calculation of a qualifying membership subscription

This example shows a membership payment might be assessed for separation into a tuition fee and a membership subscription, the latter qualifying for Gift Aid:

Choir A pays its Music Director £1,500 per year. Its committee agrees that of this fee, £1,100 is attributed towards providing tuition to members. Payments due from members are currently £75 per year and 40 members produce a total income for the choir of £3,000. Of the 40 members, 30 have signed Gift Aid declaration forms and pay UK tax as required by the scheme.

  1. Of each member’s payment to the choir, £27.50 constitutes a fee for tuition services provided by the Music Director (i.e. £1,100 ÷ 40)
  2. Of each individual payment, £47.50 can be classed as a membership subscription which qualifies for tax relief under the Gift Aid scheme (i.e. £75 - £27.50)
  3. 30 qualifying membership subscriptions generate a total figure for Gift Aid consideration of £1,425 (i.e. £47.50 x 30)
  4. Tax relief is claimed at Total qualifying income x (Basic rate of tax ÷ (100 - Basic rate of tax)) i.e. in this example: £1,425 x 20/80 = £356.25

You will need to provide your members with the information set out above to enable them to claim the appropriate deductions for higher rate tax purposes in their own tax returns.

Read our Gift Aid FAQs to find out more about claiming Gift aid on membership subscriptions

  1. Gift Aid declarations and other information to collect and keep

The donor must make a declaration of who they are, how much they are giving, and that they want tax to be reclaimed. Declarations can be in writing, or given verbally or electronically. Charities may devise their own forms based on HMRC’s templates:

Formally, a declaration requires:

The donor's first name (‘strongly encouraged’ over just an initial) and full surname

The donor's home address, including house name or number and postcode

  • The charity's name
  • Amount of donation
  • A description of the donations that the declaration relates to (present/future/past)
  • A declaration or tick box that the donations are to be given as Gift Aid donations
  • The date of the declaration
  • Confirmation the donor understands that:
    • The charity will reclaim 25p of tax on every £1 that they have given
    • They (the donor) need to pay the same amount or more of UK Income Tax and/or Capital Gains Tax as all charities and CASCs will claim on their gifts in a tax year and they (the donor) are responsible for paying any difference.

Declarations can be verbal - in which case you must read to the donor the tax cover statement and send a written record of the declaration, i.e., a note covering the points set out above. Declarations can be made in person, over the phone, by text message, website form or by email. Again, you need to collect the same details as on a paper declaration and confirm these in writing. You can use Making Music’s Record of Gift Aid Declaration template.

Donors have the right to cancel a Gift Aid declaration at any time. If an 'oral donor' cancels within 30 days from the date of the written record you send them, the declaration will be cancelled completely, and no tax should be reclaimed by the charity.

The declaration can be given before, at the same time as, or up to four years after the donation. This means you can claim Gift Aid on eligible donations made within the last four years as well as on current and future donations.

Always use the up-to-date HMRC model Gift Aid declaration form which you may tailor with your group’s own branding. Check the donor has completed the declaration correctly and retain for at least six years after the last donation to which it applies or longer if it will apply to future donations.

Record keeping & audits

Gift Aid declarations and the associated donation records must be kept for as long as Gift Aid is claimed against that declaration, which may be indefinitely.

Once a donor stops making donations, or a declaration is time limited, the declaration and records should be kept for seven years.

It is important that good records of donations, Gift Aid declarations, benefit calculations and minutes of discussions are kept and transferred when the Treasurer of your group changes.

HMRC conducts audits of Gift Aid claims and will ask to see a sample of records.

As with all record keeping, the organisation will need to make sure it meets Data Protection requirements.

HMRC compliance review

As part of an HMRC compliance review, a random sample of charities that claim Gift Aid are receiving letters asking them to file a Corporation Tax Return (form CT600E).  

Most charities never have to complete a Corporation Tax Return as they have tax reliefs that means they are exempt. However, if you receive a letter from HMRC as part of their compliance review you should file a return even if no tax is due (failure to do so may result in a penalty.) HMRC are looking at charities with higher Gift Aid claims so it is unlikely to affect our members – but if you do receive a notice, get in touch and we can help. 

  1. How to compile and submit a claim

Compiling the claim

When making your claim, you will need to supply HMRC with details of all the donations on which you are claiming a Gift Aid repayment. It is therefore sensible to pull this information together in advance of going through the online claim process.

Making a claim

Details of donations can be submitted online through your Government Gateway account using a Gift Aid schedule spreadsheet. HMRC have a template available. This indicates the detail required and explains how to report donations under £20 and donations from sponsored events.

Donation data may be entered or copy and pasted onto the spreadsheet. It can only be used to claim for a maximum of 1,000 donations at a time.

As you upload the spreadsheet, the HMRC system checks the entries for errors. You have to make sure all your records fit the HMRC permitted format, or the upload will be rejected.

You can claim as often as you need to, but you may find it useful to make a claim towards the end of your financial year in order to account for as much Gift Aid as possible in the same year as the equivalent donations.

If you are a larger charity using compliant donor management software, you may be able to use this software to submit claims directly to HMRC.

A paper claim form (ChR1) can be ordered from the HMRC Charities helpline (0300 123 1073). The ChR1 will be scanned on receipt so you must send the original form and not a photocopy.

Claim rules

  • You must provide the donor’s address in addition to the donor’s name, donation date and donation amount. If the donor’s address is in the UK, you have to provide a valid UK postcode. You can use a postcode lookup database if the donor has not provided a postcode. If the donor advises a change of address, you must use the new address for claims from then on.
  • You can aggregate up to £1,000 of donations of £20 or less onto a single claim line.
  • For sponsored events, you can list donations by event participant rather than donor. However, individual donations of £500 or more must be separated out and listed by donor.
  • For sponsored events, you can list donations by event participant rather than donor. However, individual donations of £500 or more must be separated out and listed by donor.

Submitting a claim

Once your Charities Online account is registered and activated (Step 2 above), you can use it to claim back Gift Aid.

In order to do so, you need to:

  • Log into your account using the User ID and password generated during registration
  • Go to the page ‘Services you can use’
  • Select, next to ‘Charities’:
    • ‘access service’; and then
    • ‘make a charity repayment claim’

You will be asked questions about the type of claim you are making and about your charity.

You will then be asked to fill in a ‘repayment claim details’ page with details of the donations on which you wish to claim Gift Aid.  You can supply these by attaching the schedule spreadsheet you compiled.

Usually, you will receive a Gift Aid payment by BACS within:

  • 4 weeks if you claimed online
  • 5 weeks if you claimed by post using form ChR1

There are deadlines which apply for claiming Gift Aid. Broadly these are:

  • Gift Aid - four years from the end of the financial period (tax year for trusts, accounting period for incorporated charities) the donation was received in.
  • Gift Aid under the small donations scheme (GASDS) – 2 years from the end of the tax year the donations were collected in.

Further information and guidance is available from HMRC

 


We hope you find this Making Music resource useful. If you have any comments or suggestions about the guidance please contact us. Whilst every effort is made to ensure that the content of this guidance is accurate and up to date, Making Music do not warrant, nor accept any liability or responsibility for the completeness or accuracy of the content, or for any loss which may arise from reliance on the information contained in it.