2. Gift Aid
One of a series of articles on Ringing and Money by Steve Coleman
I thought I knew all about Gift Aid until I went to your talk on fund raising for rehangs and you went through all those great Gift Aid wheezes. So just in case I missed a wheeze or two, can you go through them all again.
Oh dear! I hope no one else thought of them as wheezes, because they’re simply the way the Government intend Gift Aid to be used. They’re entirely legal and proper, and they’re a jolly good way of increasing your funds.
So starting with the very basics, Gift Aid is incredibly simple. So simple indeed, that even if you’re completely tax-averse and can’t tell your ISA from your elbow, you still won’t have the slightest difficulty in understanding it.
Any person who pays tax and who makes a payment to a charity, can sign a Gift Aid Declaration, and that declaration will enable the charity to claim 28.21p from the Government for every £1 of the donation.
That one declaration will last for all time, so you only need sign once for each charity no matter how many donations you make to it. In short, you sign once, and the charity does the work of collecting all the extra money. And what could be simpler than that?
Well, one alternative is actually simpler – because you can even give under Gift Aid without signing anything at all. You simply tell the charity – either by email, orally, by telephone, by voice mail or by text message – that you’re making a Gift Aid declaration. But if you choose one of the last four options, the charity has to confirm your declaration by writing back to you.
If you only pay tax at 20% through deduction from bank and building society interest, you can still make a Gift Aid declaration. Even if you only pay tax at the lowest rate of 10%, you can still make a Gift Aid declaration. The only requirement is that the total tax the charities claim on your giving in any tax year, doesn’t exceed the total tax you’ve paid in that year, either directly or by deduction.
If in later years you stop paying tax but carry on making payments to a charity, you must tell the charity to stop reclaiming tax on your payments.
And if you pay tax at the higher rate, you even get some tax back yourself. You enter the total amount of your Gift Aid payments on your Tax Return, and the Revenue will repay you £18 for every £78 of your donations. And that’s in addition to the amount being claimed by the charities.
Somewhat more confusingly, if you’re over 65 for all or part of the tax year but don’t get the full age-related personal allowance because your income is too high, you may also get some tax back. Similarly if you don’t get any age-related personal allowance at all but you would if your income were a little less. Tell the Revenue of your Gift Aid payments to charity – by letter if you don’t fill in a Tax Return – and you may well end up paying less tax.
The arithmetic really isn’t at all straight forward for this, and it would take a couple of columns to go through all the possibilities, but the principle is fairly simple. What we call your grossed up payments to charity – that is your payments plus what the charity claims from the Revenue – are regarded as reducing your taxable income by the same amount. The effect is that many retired people get £14.10 tax back for every £100 they give to charity.
So much for that, but what about the "wheezes"?
Well, first a Gift Aid declaration can also cover the previous six years. So if your Ringing Association is a charity and you sign a declaration now, it will be effective for all your subscriptions paid from April 2000 onwards – as well as for all your donations from April 2000 onwards – and that’s a lot of tax back. The Branch or Association Treasurer will do all the work of tracing your earlier payments in his or her receipt book.
And while we’re on the subject, if your Ringing Association is a charity, all of your annual subscription is considered by H.M. Revenue & Customs to be a donation. You may be surprised by this as there are rules limiting the amount of personal benefit you can obtain from a subscription before it ceases to count as a donation. But the rules are framed in such a way that Ringing Association subs fall completely on the right side.
And this means that there are huge benefits and very few disadvantages to registering your Ringing Association as a charity. So if yours isn’t already registered, do consider registering it. I shall explain how to in a later article.
And once your Association is registered you can look at some things rather differently. Instead of your Branch and Association Officers not bothering to claim expenses – as happens in many Branches and Associations – they can claim every penny and then donate it all back again. So for every £100 of re-donated expenses, the Association gets an extra £28.21 from the Government.
This is perfectly proper and legal, but do make sure that it’s done in two separate cheques, one from the Association for the expenses, and one from the Officer for the donation. Don’t try to net payments off against each other but still claim. And, of course, the same thing applies to ringing tea expenses. Don’t provide a free tea; charge everyone a couple of quid and then donate it back again under Gift Aid.
Paid by Others
Of course, if you don’t pay your subscription yourself, you haven’t made a donation. So if your tower fund or PCC pays it, the Association loses out. So if that’s your traditional way of paying your sub, why not change it? Keep more of your wedding fees back, for example, and pay your sub out of that. Everyone will win in the long run.
And if you’re still at school and so not paying tax yet, get your mum or dad to pay your subscription for you. Then they can sign a Gift Aid declaration in respect of you.
In the Tower
Tower funds often have a rather doubtful status which I shall write about later. But if your tower fund is simply a "restricted fund" in the PCC accounts – which is what it often is – then it’s part of a charity. Donations by visiting ringers can and should be made under Gift Aid. So if you’re on an outing, instead of each of you putting in £1 at every tower, arrange things so that each of you pays the entire donation for one tower only. You then complete a Gift Aid declaration, a supply of which your organiser takes with you.
Donations by your own band – to buy ropes, for example, or to carpet the ringing chamber – can also be made under Gift Aid. A £100 carpet then only needs a donation of £78 to buy it – or indeed, a mere £60 if you’re all higher rate taxpayers.
Once again, though, do make sure that two separate payments are made, one from you to the PCC, and one from the PCC to the supplier of the ropes or whatever.
And if you’re organising a rehang and need lots of money, do plan out the Gift Aid carefully. If you’re going to sell home made jam, for example, don’t give the jam and let the fund have the takings. Instead, charge for the ingredients and then re-donate that under Gift Aid. If you’re organising a parish coffee morning, don’t charge the parishioners for the coffee and cakes. Instead, give them the coffee and cakes and ask them to make appropriate donations under Gift Aid. At the same time, charge the fund for the coffee and cakes you supply, and then give that amount back again.
If you’re organising a sponsored peal, don’t just have a normal sponsoring sheet. Instead, have one with a Gift Aid column for all the sponsors to sign. Revenue and Customs will let you have a copy of the appropriate form or you can get one from their website.
And lastly, don’t go in for one of those irritating draws or raffles with a load of prizes .... that no one wants. Most of those prizes have been recycled from earlier raffles anyway. Instead, just ask for donations under Gift Aid. Be up front and ask boldly and clearly for money. It’s honest, it’s robust and it’s remarkably effective.
The Big Donation
And if you’re so successful that someone wants to make a really large donation but they won’t be paying enough tax in the year to cover it, don’t worry. You or your church treasurer can discuss their tax position confidentially with them and then arrange for some of the money to be given at once as a donation while the balance is also given at once but as an interest free loan.
The following year some or all of the interest free loan is repaid and a further donation of the same amount is given. And so on, until the entire sum has been subject to Gift Aid. That way you get the whole gift up front with the tax reclaims coming along behind.
The Revenue are entirely happy with this as long as separate cheques pass each way for all the payments. As I said before, don’t try to skimp on the paperwork.
And the dangers?
Quite simply, there are none. You will not be investigated by the Revenue simply because you’ve signed a Gift Aid declaration. You will not be trapped into paying any subscriptions or donations you don’t want to. You will not be disadvantaged in any way whatsoever. With one signature you will simply be enabling your Association or your tower to get money for nothing. And what could be more satisfying than that?