Gift Aid and Gift Aid Claiming
Gift Aid provides charities and community amateur sports clubs (CASC) with a means of receiving tax relief on donations received. An additional scheme to deal with recovering gift aid on small cash donations known as the Gift Aid Small Donations Scheme (GASDS) is also available.
GASDS is a distinct scheme from Gift Aid albeit a claim can include both elements.
From the donation ledger the system handles Gift Aid and Gift Aid Small Donations claims as well as dealing with benefits, connected charities and community buildings.
Source of Donations
Where donations are received for individuals, the charity can reclaim the basic rate of income or capital gains tax that the individual has paid on their income out of which the donation has been paid. The individual must provide the charity with a Gift Aid Declaration.
The income to the charity from the donation is supplemented by by the Gift Aid at a current rate of 25% (Provided the basic rate of tax remains 20%)
Where there is a corporate donation the company pays a gross amount to the charity and simply deducts that amount from its taxable profits. There is no need for a gift aid declaration and the charity does not claim Gift Aid.
As might be expected, the process of Gift Aid is subject to rules and HMRC may arrange inspection visits to a charity to ensure those rules are complied with.
Brief Outline of the Gift Aid and GASDS rules
The comments below are an outline of the Gift Aid and GASDS rules for informational purposes only and are certainly not comprehensive and should not be relied upon. The user is strongly advised to take appropriate professional advice to ensure compliance in the particular circumstance of their charity or CASC.
Gift Aid may be claimed on donations from individuals provided that -
- A Gift Aid Declaration has been provided by the donor
- The donation is in monetary form, not assets or gifts in kind, although see the retail gift aid scheme for donated goods
- The donation should be freely given and nothing substantial is given in return
Gift Aid Small Donations Scheme - GASDS
GASDS has been available from 6th April 2013. It allows a charity to claim Gift Aid on small cash donations without having to hold Gift Aid Declarations. The total value of small donations is capped. (See below). GASDS may be claimed provided: -
- The charity must have been established, for tax purposes, for at least two full consecutive tax years before the start of the tax year in which a GASDS claim is first made
- The charity must make a successful Gift Aid claim in the tax year
- There must have been at least two successful Gift Aid claims in the previous four years
- The charity has not incurred any Gift Aid or GASDS penalties
- Any donation must from an individual given as a cash/contactless donation and under the prevailing limit.
- All GASDS donations must be banked in a Bank or Building Society branch physically located in the UK
- There must be no benefits associated with the donations
The value of small donations in any tax year is capped at the lower of £8,000 (£5,000 up to 5th April 2016) or 10 times the value of donations on which Gift Aid has been successfully claimed in the tax year.
If two or more charities are connected the £8,000 figure is divided by the number of connected charities. Please seek advice from a professional advisor for the rules on what constitutes a connected charity.
Rules also exist for small donations that are collected in community buildings, in essence each community building has a cap of £8,000 so two community buildings means a cap of £16,000. Again please seek advice from a professional advisor for clarification.
Note a charity claims a GASDS top up or Community Buildings top up but not both.
Creating a claim in summary
- Ensure any donation and gift aid configuration has been completed
- Ensure details of donors and their Gift Aid tax status are valid
- Make sure all appropriate Gift Aid declarations have been received to support claims
- Enter all Gift Aid donations onto the system associating them to Donors
- Enter all small donations that are to be included in a GASDS claim associating them with the specific donor '.GASDS'
- Prepare the Gift Aid Claim
- Review the claim details, make adjustments as necessary, and submit the claim to HMRC
- Print and store reports as necessary
Donation and Gift Aid Configuration
Donation and Gift Aid configuration is accessed via the Donors menu
Donors - Configuration
The Donation and Gift Aid configuration screen is presented.
More information is available from Donations and Gift Aid Configuration
Donors and Gift Aid tax status
Donors and their tax status may be viewed, amended or added from the donor listing.
Donors - Donors
Existing donors are listed displaying donor code (for used for donation upload purposes), tax status and access to the learned accounts associated with the donor; clicking EDIT opens up the detail screen for amendments if necessary. TEACH opens up the learned accounts screen.
A new donor may be added by clicking ADD, the Add Donor screen is presented.
Select the donor type.
- Gift Aid - Gift Aid may be claimed on donations from this donor
- Non-Gift Aid - Gift Aid is not claimed on donations from the donor
- Corporate - The donor is a corporate entity
A Donor Code may be added, for example a gift aid envelope number. A code may be used as a filter when adding new donations from a donor and as a reference in donation upload files.
The address details on the donor contact details tab will be the address that will used for gift aid claim and other communication purposes.
Mandatory fields when the donor is a Gift Aid or Non-Gift Aid donor are: -
- First Name
- Last Name
- Address Line 1
- Post Code
Until data is entered in these fields they remain highlighted in red.
If the donor is a corporate donor only the Display name is mandatory.
For cases when documents are emailed to this donor, select the method by which the recipient retrieves the document, either as an attachment to the email or as a link to the document.
On the Gift Aid details tab tax status information is entered.
Enter a date from which the donor is treated a taxpayer for gift aid purposes. This is only available if the donor is a Gift Aid donor.
Enter a date from which the donor is treated as a non - taxpayer and gift aid will not be claimed on any future donations.
Tick the Member box to indicate that the donor is a member of the entity enter relevant dates . If nothing is indicated than the default position is not a member.
When all information has been added click SUBMIT to store the record.
More information on adding donors via a file upload is available from Donor Upload Process.
Entering Donations and GASDS Donations
Only designated Donation transactions on the system are included in any Gift Aid claim. Transactions recorded using a Receipt document are NOT included.
Donations are added from the Donors menu.
Donors - Add Donation
In order to ensure that GASDS donations are included in any GASDS claim a special system Donor is used. Allocate any small cash donations that are to be included to the donor '.GASDS'
Small cash donations that are not to be included in a GASDS claim to the donor '.NON-GASDS'. This may be where the cash amount from an individual donor exceeds exceeds the current threshold amount.
Donations may be entered singly, as a batch or uploaded from a csv file.
This screen is used to create and edit donation details.
Mandatory data fields are highlighted in red.
The SUBMIT button stores the information once it has been entered.
Note returning to a donation that has been created and stored a MEMORISE button is available to set up a memorised transaction for regular donations. See Memorised Transactions for more background.
Select the donor making this donation
In order to ensure that GASDS (Gift Aid Small Donations Scheme) donations are included in any GASDS claim a special system Donor is used. Allocate any small cash donations that are to be included to the donor .GASDS
When the .GASDS donor is selected clicking the GASDS SUPPLEMENT button offers a screen in which a cash analysis supporting the claim may be entered. Using this is not mandatory from a system perspective, but it may be useful for keeping a complete record for GASDS purposes. This is a users decision.
For small cash donations that are not to be included in a GASDS claim, select the donor .NON-GASDS. This may be where the cash/contactless donation from an individual donor exceeds the prevailing limit.
Enter the date of the donation. This date will be used in any relevant gift aid claim.
The default format for the date is: d/m/yyyy e.g. 25/1/2007
This is the amount of the donation.
Donation Benefit Value
Where a donation attracts a benefit to the donor there may be implications on the gift aid that may be claimed.
Enter the value of any benefits the donation attracts and this will be tested by the system against the gift-aid benefit rules when the donation is included in a claim.
Please consult with a professional advisor for more information.
Where donations are collected on the organisations behalf by a third party there will often be a fee when passing on that donation. Enter the fee amount.
The system will compute the difference (Donation less Fee) as the amount deposited to the organisation.
The accounting treatment is as follows (based on a £50 donation with £1 fee):
- Donations account £50
- Donation fee account £1
- Bank account £49
The Gift Aid claim will include the gross donation i.e. £50.
Select the account to which the receipt is to be recorded.
Select the Income Account appropriate to the donation.
Select the fund associated with this donation.
If relevant select an activity associated with this donation.
If the donation is as a result of a sponsored event, select the event.
This will be used in any gift-aid claim
Reference and Memo
Enter any Reference or Memo information as required.
Gift Aid Claimed Externally
Tick this item if Gift Aid is claimed externally for this donation. This will ensure the donation is not included in Gift Aid claims generated in Liberty Accounts but will count the donation when calculating GASDS claim allowable. This item is only available for donors specified as Gift Aid donors.
Gift Aid Not Claimable
Where a donor who is normally a Gift Aid donor makes a donation but informs you that their tax/income situation in the current tax year is such that it would not be lawful to claim Gift Aid, this option can be checked. This option can be used when the situation is temporary to avoid the need to manage their taxpayer status date, or change them to a non-gift aid donor type. This item is only available for donors specified as Gift Aid donors.
In addition to entering donations singly, multiple donations may be entered using a batch input screen or by uploading a file.
More information on adding donations via a file upload is available from Donor Upload Process and more on using the batch screen from Batch Donation
Prepare a first Gift Aid Claim on the system
Note a gift aid claim must be submitted by an Authorised Official. So the user making a claim via the system must be an authorised official. Form CHV1 from HMRC allows for details of officials to be updated if necessary. Follow this link to the HMRC site Form CHV1
A Gift Aid claim is prepared from the HMRC menu.
HMRC - Gift Aid Claims - ADD CLAIM or ADD
Note; ignore all references to GASDS if not relevant.
A Gift Aid claim multi-tabbed screen is presented and is used to build a Gift Aid claim and display information associated with the claim.
Claims are prepared within tax years. Select the relevant tax period for the claim.
Specify any date within the tax year as the claim 'to' date e.g. month end or quarter end All eligible donations dated up to and including the date will be included in the claim. The default date is the current date.
Prior GA claimed in tax year and Prior GASDS claimed in tax year boxes will only be available on the very first Gift Aid claim prepared on the system; they will not display subsequently.
Where a claim is being made including Gift Aid Small Donations Scheme (GASDS) donations, tests are performed by the system to ensure that any GASDS is within the allowed thresholds.
To complete these test accurately the system will need to know the amounts of any Gift Aid received and GASDS received and claimed already that are not recorded on the system.
Finally enter any adjustment amounts to prior claims that need to be reflected in this claim. Note that the adjustment amount is the amount of tax (not the value of donations).
Briefly explain those adjustments in the text box, no more than 350 characters. When the claim is submitted to HMRC, this information is included.
Click the SUBMIT button to prepare the claim.
The claim financial summary, including (if relevant) how the GASDS thresholds are applied is displayed.
To continue with completing the claim click SUBMIT again.
The list of claims screen is re-drawn and the particular claim is displayed with a status of Pending
For those reporting under Income & Expenditure (Accrual) basis the system creates a journal for the likely amount of the gift aid to be received analysed over the relevant funds. The posting is as follows:-
- Increase (credit) the Gift Aid Claimed account (as a income) - split between funds in same percentage as donations claimed are split
- Increase (debit) the Gift Aid Pending account (as a current asset)
The accrual journal(s) raised can be view from the action menu to the left of the Gift Aid Claim or by viewing from 'Control - Journals' or 'Accounts - Find Transaction'. If the user deletes an accrual journal from the system then the action menu for the Gift Aid Claim will not have the option to view the associated journal (as it has been deleted).
Gift Aid Claim report
With each claim listed you have a printer icon to generate the Gift Aid Claim report for that claim.The report details, by donor, the total donations for that donor that are eligible and have been claimed and also the donations, by donor, that have been considered and are not eligible. At the bottom of the report you have the calculation summary and the breakdown of donations by fund showing how the receipt should be split when received from HMRC (see further down).
Recording the receipt from HMRC
The action taken to record the claim receipt from HMRC will depend on whether you are reporting under Income & Expenditure (Accrual) (where a journal has been created when you raised the claim) or Receipts & Payments where no journal is generated by the system (as you only account for income when it is actually received).
Income & Expenditure (Accrual) Whether through the bank import or manual entry use Add Receipt. The receipt is record against the system 3rd party HMRC Tax Authority to the Gift Aid Pending account.
Receipts & Payments Whether through the bank import or manual entry use Add Receipt. The receipt is record against the system 3rd party HMRC Tax Authority to the income account Gift Aid Claimed and split between the funds as detailed on the Gift Aid Claim report.
If the receipt from HMRC does not exactly match
As Receipts & Payment users are recording directly to the income account Gift Aid Claimed this does NOT apply to them but Income & Expenditure (Accrual) users may have a situation where the received amount does not equal the value held in the asset account Gift Aid Pending that was created when you raised the claim.There are different courses of action that can be taken where the receipt differs:
- Delete the accrual journal raised by the system and receipt the receipt, split by fund, to the Gift Aid Claimed (income) account;
- Record the amount received to Gift Aid Pending but add a second line for the difference (which may be a positive or negative amount) recording it to Gift Aid Claimed (income) account against the appropriate fund
The value remaining in your Gift Aid Pending (liability) account should only be the value of the claim(s) currently lodged with HMRC that have not yet been paid by HMRC.
Control - Journals
Filing a Gift Aid claim at HMRC
To proceed to filing make sure appropriate Government Gateway Credentials have been set; If they have not already been set for PAYE, P11D or VAT purposes.
HMRC - Credentials
Return to the Gift Aid Claims screen (if not already there) and then click the Send arrow icon or Send to HMRC from the Action Menu
The status of the claim is updated.
Polling takes place each hour and the status will show 'Queued' until polling is attempted. Until polling has started the submission may be recalled by clicking the RECALL button.
The Action Menu has the following actions available:-
- Opens the details of the claim and on the feedback tab will additionally show any error messages and responses from the system and/or HMRC gateway
- Anytime up to the status being committed the claim can be recalled
- Available so long as the claim is in a status to be deleted i.e. not filed with HMRC
Government Gateway Submission Status
Indication of the current status that will be one of the following:
- Indicates that an item exists in the system but has not been "sent" by the user. Typically an item is generated at the request of the user. Once it has been generated the user will need to review and possibly add to the automatically generated details of the submission. In all cases the user will at least need to add their authentication credentials as provided by the Government Gateway before they can successfully submit to the Gateway.
- Indicates that an item has successfully passed local validation in the system and is now in a queue waiting to be sent to the Government Gateway. Queued items are normally processed each odd hour on the hour e.g. 11:00, 13:00 etc
- Indicates that an item has been recalled from the Gateway queue. An item can be recalled from the queue at any time before it has been sent to the Government Gateway. It is also possible to recall an item if it has failed remote validation and a change is required before resubmission. e.g. incorrect Gateway password.
- Indicates that an item has been sent to the Government Gateway and the system is currently polling the Gateway at each even hour on the hour (12:00, 14:00 etc) to check the status of the submission.
- Failed - Local Validation:
- Indicates an item has failed local validation. The system uses its best endeavours to validate data before trying to send it to the Government Gateway. An item with this status will need to be changed before it can be successfully queued for the Gateway.
- Failed - Remote Validation:
- Indicates that an item has failed validation in the Government Gateway system. An item in this state can be deleted or recalled for any necessary changes to be made prior to resubmission.
- Indicates that the Government Gateway has acknowledged an item as a successful submission.
- Failed - Max Tries:
- Indicates that the system has given up trying to send an item to the Government Gateway. If you have an item at this status you should contact Liberty Accounts support.
Failure of a Submission
If the submission fails, take note of the message that describes the nature of the failure. Delete the failed submission so that the system is reset and corrections may be made by clicking DELETE Make the corrections as necessary and repeat the submission process described above.
We recommend that you regularly review messages until you are sure that the full return has been made.
After successful submission, Claims may be viewed and printed but not changed.
Prepare subsequent Gift Aid Claims
Subsequent gift aid claims are prepared in the same way as described above, except the screen does not have data fields for Gift Aid received and GASDS received and claimed already.
The next claim will pick up all donations for the selected tax year that have not already been included in a claim.