How Gift Aid Works for Academy Trusts
Gift Aid Overview
Gift Aid is a UK tax relief scheme that allows charities to claim back 25% of the value of donations made by taxpayers, at no extra cost to the donor, making it an effective way for academies to generate additional funds.
Academies can claim relief on donations such as monetary gifts that are made by donors in the form of cash or bank transfers. It is important to note that these payments do not include payments received for providing services.
Charitable Status and HMRC Registration
Although academy trusts are classified as exempt charities, they must register with HMRC to be recognized for tax reliefs, including Gift Aid. This involves obtaining a unique charity reference number from HMRC.
Gift Aid Declaration Forms
To claim Gift Aid, the academy trust must secure a Gift Aid declaration form from each donor. This declaration form is to be filled by every donor to successfully claim the Gift Aid donations.
There is no set design for a declaration form, but it is important that it must include:
- The name of your Academy
- The donor’s full name
- The donor’s home address
- Whether the declaration covers past, present or future donations or just a single donation
- A statement that the donor wants Gift Aid to apply
- An explanation that the donor needs to pay the same amount or more of UK Income Tax and/or Capital Gains Tax as all charities will claim on the donor’s gifts in a tax year and that the donor is responsible to pay any difference
This declaration confirms that the donor has paid sufficient UK Income Tax or Capital Gains Tax to cover the amount reclaimed by the charity. A Gift Aid declaration can be made before, during, or after a donation, allowing the academy to claim Gift Aid for future or past contributions.
Example – Declaration Form (Single Donation)
Requirements
The donation must be a voluntary gift from a UK taxpayer and must not be linked to any benefit provided to a student connected to the donor. If a donor receives a specific benefit from the donations, then it would not be seen as a voluntary donation by HMRC and cannot be used for the Gift Aid.
Filing Gift Aid Claims
If you do not have an account, you’ll need to register online on Charities-Online on the official HMRC website. Once registered, you will receive an activation code, which takes around a week to arrive. After this, charities can easily make claims using their IDs on the official HMRC website.
When You Must Claim
Claims of the donations received are to be claimed within 4 years of the end of the financial year in which they are received. The records of the donations received are to be kept for a further 2 more years.
How to Claim
A proper guide on Gift Aid can be read on the HMRC portal. You will need to attach a ‘schedule spreadsheet’ and can claim up to 1,000 donations on each spreadsheet.
Benefits for Donors
For basic rate taxpayer (20%)
The primary benefit is that their chosen charity can reclaim 25% of the donated amount from HM Revenue & Customs (HMRC). For example, a donation of £1,000 allows the academy to claim an additional £250, making the total contribution £1,250. However, the donor does not receive any additional personal tax relief beyond this.
For higher rate taxpayer (40%)
Donors paying higher or additional rates of tax can claim back the difference between the basic rate and their higher rate on the gross value of their donation. For instance, a higher-rate taxpayer donating £1,000 can claim back £250 (20% of £1,250) from HMRC.
For additional rate taxpayer (45%)
Similarly, an additional-rate taxpayer can claim back £312.50 (25% of £1,250). 25% being the difference in additional rate and basic rate.
Gift Aid Small Donations Scheme (GASDS)
The Gift Aid Small Donations Scheme (GASDS) allows charities, including academies, to claim Gift Aid on small cash donations of £30 or less without requiring a Gift Aid declaration from the donor.
- Cash donations of £30 or less: If someone donates £30 or less in cash, the academy can claim 25% of the donation amount from the government, without needing the donor to complete a Gift Aid declaration.
- Contactless card donations of £30 or less collected on or after 6 April 2019 also qualify under the scheme if the donation is made on or after this date.
Annual Limit
Charities can claim up to £2,000 per tax year under this scheme, which applies to all small donations, including those collected through contactless payments or cash.
Cancelled Declarations
A donor can cancel their declaration at any time, e.g., because they no longer pay UK tax. Cancellation will not affect Gift Aid donations already made. Once a declaration has been cancelled, any further donations from that donor will not qualify.