Gift Aid is a long established scheme and generally well understood and used by churches. Here is a list of 10 do’s and don’ts to help make sure you are operating the scheme well.
- Do encourage the use of the Gift Aid scheme. From time to time remind the church about the scheme, follow up new donors, and make Gift Aid declaration forms available. Gift Aid can be a significant income stream, so make the most of it.
- Do make sure that you have valid Gift Aid declarations forms for each donor from whom you are seeking to claim Gift Aid.
- The HMRC's suggested wording to be used on Gift Aid forms is amended from time to time, so if you haven't looked at your declaration forms recently, it may be worth looking at the templates on the HMRC website and:
- Use them for new declarations;
- Consider reissuing older declarations based on the updated wording. Declarations based on older wordings are not invalid, but a periodic refresh, say every 5 years or so, is sometimes in order if only to serve as a reminder to donors.
- Technically Gift Aid declaration forms do not require a signature. However, “best practice” would suggest that they are signed and it’s easy to introduce a signature space on the HMRC templates.
- Do ensure that you have a solid audit trail back from the donation to the donor. This is particularly important where you make use of envelopes or other similar schemes where the donor is not obvious. Keep some evidence to support the audit trail, maybe a selection of envelopes for example, and if donation envelopes include the Gift Aid declaration then these must always be retained.
- Don’t miss the claims deadlines as it can be costly if you do. Claims must be completed within 4 years of the end of the financial year in which the gift was received. Claiming Gift Aid on a regular basis (at least once a year) generally helps church cash flow and should avoid this issue.
- Do follow the examples on how to layout a claim (title, name, address etc.) that are provided by HMRC as part of the spreadsheet claims form on their website. Failure to do so can lead to claims being annoyingly rejected and then requiring resubmission.
- Don’t forget that unless otherwise notified by the donor, the Gift Aid attaches to the gift. So Gift Aid claimed on donations into restricted funds will, unless otherwise notified, also flow into the restricted fund. Make sure this is properly treated in whichever accounting system you use.
- Do periodically remind donors of their requirement to have paid sufficient tax in order for you to recover Gift Aid. The responsibility and any subsequent liability for any underpaid tax rests with the donor, but you do not want the pastoral issues that may arise as a result of donors being in financial difficulty having to settle a tax liability.
- Do keep sufficient records to support claims and to provide information to independent examiners at the end of the year.
- Don’t forget the Gift Aid Small Donation Scheme but remember:
- The rules that apply to the scheme;
- That the claim dates are different from Gift Aid being based on tax years rather than accounting years with a 2 year rather than a 4 year limit;
- The rules regarding community buildings were amended for donations received after 6 April 2017.
See the link to one of our own briefing papers on this issue. More are available on our website.