How Gift Aid Works
If a taxpayer (paying Income tax and/or Capital Gains Tax) makes a gift to a recognised charity (eg a PCC) using a simple Gift Aid declaration, the charity can then reclaim from HMRC the basic rate tax already paid by the taxpayer. Currently this is worth 25% of the net gift made by the donor. So a cash gift of £10 made through Gift Aid becomes worth £12.50 to the church.
Currently HM Revenue & Customs (HMRC) requires that two pieces of written evidence must be available for auditing to obtain a Gift Aid (GA) refund:
1. A valid Gift Aid Declaration (GAD) containing
- The church’s full name (and charity registration number if applicable)
- The donor’s initials and surname, address and postcode
- A statement that the donor is a UK tax-payer who pays sufficient income or capital gains tax to cover all his/her charitable giving
- A statement that the donor will advise the church of any change of address or tax status (only required for ongoing donations)
- A statement that the donor wishes the donation (and ideally any past and future donations) to be made under Gift Aid
- The date and (ideally) the donor’s signature
2. Written evidence that the specific donation(s) were actually made by the donor – an audit trail from donation to banking. For example an envelope marked with amount of cash donation, or bank statements for cheques and standing orders.
See the HMRC's Guidance Notes for more details
“G-codes” for regular taxpaying supporters
Many of the opportunities explored in these notes depend on changing the methods by which regular church members make their one-off donations to identify that they are available for Gift Aid. To save a new Gift Aid declaration being filled out each time, it is suggested that you allocate a “G-code” (eg G123) to each taxpayer with a valid Gift Aid declaration. The donor then simply writes their individual G-code on each one-off contribution (eg collection envelope) to save writing out their full name and address each time. If you already give regular donors a code number (eg for weekly envelopes), why not use the same number with a G-prefix, and issue new G-codes to taxpayers who haven’t got existing codes (for example because they only give by standing order). That way, if they want to make an additional one-off gift (eg an Easter offering), they can do so without needing to fill in a complete new declaration.
Setting priorities and a timetable
A key task for parish treasurers, Gift Aid secretaries and fundraisers is to evaluate which of the potential missing Gift Aid streams will yield the greatest tax refunds for the amount of extra administrative effort involved in the specific circumstances of their parish.
Clergy and parish officers are advised to agree a priority order and timetable for implementing any of the improved ways of collecting more Gift Aid. You should probably allow two or three months for people to become used to a new procedure before introducing another new idea. Other changes might be phased in – for example only asking donors of “goods in kind” worth more than say £10 to complete the additional declaration the first time the system is introduced, and then gradually lowering the threshold to say £4 – or whatever level you find comfortable.