Codec Accounting – plain English accounting for charities, small businesses and sole traders in Ealing, West London and across London.
Gift Aid lets your charity claim back 25p from HMRC for every £1 an eligible individual donates. For a small charity, that is extra income on money you already receive. To claim it, you need HMRC recognition, valid declarations, good records and a claim through Charities Online.
This guide covers each step, the time limits, the Gift Aid Small Donations Scheme and the rules on thanking donors.
This article covers charities in England and Wales. Rules change from time to time, so check the latest guidance on GOV.UK.
Step 1: Get recognised by HMRC
Your charity must be recognised by HMRC as a charity for tax purposes before it can claim. Registering with the Charity Commission does not do this. You apply to HMRC separately, online.
You will need:
the charity's bank account details and financial accounts
details of its officials, including dates of birth and National Insurance numbers
your Charity Commission registration number, if you have one
your charitable objectives
your governing document.
You cannot claim Gift Aid on donations received before HMRC recognised your charity. Apply early.
Authorised officials
HMRC repays claims only when they are made by an authorised official, nominee or collection agency that the charity has notified to HMRC. If your treasurer changes, tell HMRC on form ChV1 straight away. Do not wait until the next claim.
Step 2: Know what you can claim on
You can claim Gift Aid on donations of money from individuals who have paid at least as much UK Income Tax or Capital Gains Tax in that tax year as all charities will claim on their gifts.
You cannot claim on:
payments for goods or services, such as concert tickets or a sponsored challenge registration fee
donations from companies
donations made through Payroll Giving
gifts made on behalf of someone else
gifts with a condition about repayment, or a condition that the charity buys from the donor
a "minimum donation" where there is no choice about paying
charity vouchers or charity cheques, such as CAF vouchers
donations received before HMRC recognised your charity.
Special rules apply to sponsored challenges, membership fees, church collections, charity shop sales, events, auctions and volunteer expenses donated back.
Step 3: Collect valid Gift Aid declarations
A declaration is the donor's permission for you to claim. There is no set form, and it can be made in writing, verbally or online. It must include:
the name of your charity
the donor's full name
the donor's full home address, including postcode
whether it covers past, present and future donations or a single donation
a statement that the donor wants Gift Aid to apply, such as a tick box
an explanation that the donor must pay at least as much UK Income Tax or Capital Gains Tax as all charities will claim on their gifts in the tax year, and that they are responsible for any difference.
Donors who live in the Channel Islands or the Isle of Man are described as "non-UK donors" and no postcode is given. HMRC publishes example declarations for one-off donations, all donations and sponsored events. You can also print a declaration on collection envelopes.
Verbal declarations. You must send the donor a written confirmation with the same information. It must tell them they can cancel within 30 days.
Cancellations. A donor can cancel at any time. It does not affect donations already made, but later donations do not qualify. Record the cancellation and its date.
Keep the records
Keep declarations for 6 years after the most recent donation you claimed on. HMRC can ask to see them. If you cannot show a valid declaration, you will have to repay the tax claimed, and HMRC can add interest and penalties.
Step 4: Make the claim through Charities Online
You claim through HMRC's Charities Online service, using either:
a spreadsheet schedule of your donations, or
eligible software, such as a donor database.
Claims covering more than 1,000 donations must use software. You can also claim on paper using form ChR1, available from the charities helpline. HMRC rejects claims made any other way.
Payment arrives by BACS within 4 weeks of an online claim, or 5 weeks for a paper claim on form ChR1.
If you find you were overpaid on an earlier claim, enter the amount of tax overclaimed in the schedule, not the value of the donation. It is deducted from your next claim.
Time limits
You must claim within 4 years of the end of the financial period you received the donation in:
Trusts: the tax year (6 April to 5 April).
CIOs and charitable companies: your accounting period.
Claims under the Gift Aid Small Donations Scheme have a shorter limit, covered below.
The Gift Aid Small Donations Scheme (GASDS)
GASDS lets you claim 25% on small donations without a declaration. It covers:
cash donations of £30 or less
contactless card donations of £30 or less (collected on or after 6 April 2019).
Limits and conditions:
You can claim on up to £8,000 of small donations a year, which is £2,000 in top-up payments (tax years from 6 April 2016).
Your GASDS claim cannot be more than 10 times your Gift Aid claim in the same tax year. With £100 of Gift Aid donations, you can claim on £1,000 of small donations.
Your charity must have claimed Gift Aid in the same tax year, and without a penalty in the last 2 tax years.
Membership fees do not qualify.
Connected charities without a community building must share a single £8,000 limit. If one of them has a community building, they can all either claim as if they had a community building or share a single £8,000 limit (all must write to HMRC to share).
Community buildings. If your charity has a community building, such as a village hall or a place of worship, you may be able to claim more on donations collected there or in the same council area. You need to have held at least 6 charity events there, each attended by at least 10 people.
Records. Record the total collected, the collection date and the date it was banked. Keep card machine receipts for contactless donations. For community building collections, also record the address and postcode, the type of event, the number of events and an estimate of attendance.
Time limit. Claim within 2 years of the end of the tax year the donations were collected in. Keep the records for a further 2 years.
You claim GASDS in the same way as Gift Aid.
Thanking donors: the benefit rules
A thank-you gift, ticket or other benefit can stop a donation qualifying. You can still claim if the benefit stays within these limits:
| Donation | Maximum value of benefit |
|---|---|
| Up to £100 | 25% of the donation |
| Over £100 | £25 plus 5% of the amount over £100 |
The total value of benefits a donor receives as a result of their Gift Aid donations to your charity in one tax year must also not exceed £2,500.
The value is what the item or service is worth to the donor, usually its retail price, not what it cost the charity. For a private event, it is the cost of the event divided by the number of guests. The limits also apply when a family member or a company run by the donor receives the benefit.
Newsletters explaining your charity's work and simple thank-you plaques are not benefits. Keep a record of every benefit given to Gift Aid donors.
Why claims go wrong
Unauthorised person claiming. HMRC repays only claims made by a notified official, nominee or agent.
Missing or incomplete declarations. Tax claimed without a valid declaration must be repaid.
Ineligible payments. Ticket sales, registration fees, company donations and charity vouchers or cheques do not qualify.
Benefits over the limits. A generous thank-you can disqualify the donation.
Late claims. Gift Aid must be claimed within 4 years, and GASDS within 2 years.
Wrong claim method. Claims not made through Charities Online or form ChR1 are rejected.
Common questions
We only collect cash in tins. Can we use GASDS alone? No. You must also claim Gift Aid in the same tax year, and your GASDS claim cannot be more than 10 times that claim.
Does a donor need to sign the declaration? No set format is required. Written, verbal and online declarations are all valid if they contain the required information. Verbal declarations need a written confirmation.
How far back can we claim? Four years from the end of the financial period for Gift Aid. Two years from the end of the tax year for GASDS.
How Codec Accounting can help
We cover all areas of accounting, but we have deeper skills and experience with charities. We work with charities across Ealing, West London and London, as well as remotely across the UK. We can:
Set up your HMRC recognition and authorised officials.
Review your declaration wording and record keeping.
Prepare and submit your Gift Aid and GASDS claims through Charities Online, once you have notified HMRC that we act as your nominee.
Find past donations you can still claim within the 4-year limit.
Unclaimed Gift Aid is lost once the time limit passes. The 4-year window is the money a small charity can still recover.
Book a meeting, call 0203 143 2772 or contact us to talk it through.
This article is general guidance, not advice for your specific situation. Requirements change, so check current guidance on GOV.UK.