Governments in the developed world have introduced several legislations to encourage NGOs and those that donate for them. Back in 1990, the UK government introduced a scheme called Gift Aid UK. Under this program, eligible organizations can claim 25% extra on each donation from the HMRC. For example, if you donate 100 pounds the government can claim an extra 25% which makes a total donation 125 pounds.
Thanks to this program, charities are able to claim millions of extra pounds which are used to uplift marginalized and oppressed communities. That said, the process is not as simple. Individual’s tax status, organization’s registration and a number of other factors are involved in it. In this guide we will try to break it down for you.
How To Get Gift Aid
Charities are able to claim Gift Aid only if:
- Donors check the Gid Aid Box while donating
- Filling out a Gift Aid Form on the charity’s website
You have to complete either of this process once and the charity would be able to claim donations on your behalf. However, you need to inform the concerned charity about changes in address, tax status and name to prevent false claims against your name.
Donations That Qualify For Gift Aid
All the voluntary donations to charities that are registered as NGOs qualify for the Gift Aid program. That said, the scheme is only available for those residents that pay a sufficient amount of tax. When you sign up for the program, all the donations be it cash, credit or debit card and cheque become eligible for additional aid.
However, donors that have already claimed another scheme like Charities Aid Foundation payments, tax relief or payroll gifts are not eligible for Gift Aid.
Are You Eligible For Gift Aid?
Individuals that are eligible for Gift Aid should be:
- Tax payer in UK
- Amount of tax paid or that donors expect should be enough to cover claims charities are making on their behalf. For example, if you have paid a cumulative tax of 1000 pounds, the NGO will only be able to claim a similar amount on your behalf.
- File a Gift Aid declaration form.
- Pay enough tax to cover the donation made over four years if donors are completing an enduring gift aid declaration.
Charities effectively claim 20% of the gross value of the donation. Furthermore, donors that fail to inform charities about change in tax status can be liable for penalties in forthcoming tax returns.
Gift Aid On Items Donated To Charity Shops
Gift Aid is only applicable on the monetary donations made to charities. However, several NGOs have their shops which can convert items into cash which subsequently can be donated to charity to claim Gift Aid.
The British Red Cross shop entertains such donors and issues a Give and Loyalty card to them. You can use this card while donating items to charity. The card includes a Gift Aid number which charities and government use to track your donations.
Furthermore, donors that are already eligible for Tax Aid can print a label on the item. Such individuals do not need Gain and Loyalty cards from charity. However, the amount of tax that you have paid dictates the additional amount charities can claim in this case as well.
Few Important Considerations
We have discussed all the basics of Tax Aids but there are some additional details that one should be familiar with.
- You do not have to sign up for the Tax Aid each year. Your declaration would give the charity an enduring permission to claim gift aid for the previous four year and current year. This also includes all the donations that you made in the future.
- Charities can keep claiming the additional amount until you inform them to stop. Hence, any changes made in your tax status should be communicated to the concerned NGOs. For example, if you have paid 1000 pounds in tax the organization will keep claiming until it has reached the 1000 pounds. If you start to pay higher tax next year, the organization would still claim the mentioned amount.
- And if you stop paying the tax, the organization would not stop claiming unless you tell them to. So, not informing them about the changes in tax status can impose penalties which would be reflected in your annual tax returns.
- Pensioners with assets that are not included in the tax returns are not eligible for Gift Aid. The income of such individuals is not eligible for income tax and thus charities can claim nothing against their donations.
- There is no additional paperwork apart from filling an online form that is available on the websites of most charitable organizations.
- Donations that are made via companies or other people’s money are not eligible for Gift Aid. Donors have to make the transaction from the personal bank account, credit or debit card.
Who Should Sign Up For Gift Aid UK ?
As discussed earlier, signing up for Gift Aid renders you ineligible for other schemes including the Tax relief. Hence, donors who wish to get a reduction in their annual tax returns should not sign up for Gift Aid. However, if you are content with sacrificing that luxury there is nothing better that you can do for a charitable organization.
Bottom Line
Gift Aid is a brilliant scheme that encourages NGOs to work for the betterment of disadvantaged individuals. Transparent Hands is a nonprofit organization that is registered in the UK. It provides medical treatments to patients that are unable to afford them in a developing country, Pakistan. So far thousands of patients have been able to get their surgeries and other treatments from them. Many more are still waiting.
Thus, sign up for Gift Aid and donate for Transparent Hands to give underprivileged patients their life back. Thank you!
Add Comment