What is Gift Aid?
Gift Aid gives a charity an extra 25p for every £1 donated.

HMRC Gift Aid is a scheme that allows registered charities to reclaim tax on a donation made by UK taxpayers. A registered charity can claim Gift Aid using a spreadsheet or eligible software. For larger third-sector organisations processing claims over 1,000 donations, software must be used to successfully reclaim the tax from the donation.

With increasing amounts of time given to planning successful fundraising campaigns, maximising the amount generously donated by your organisation’s supporters will make a massive difference to the work your organisation helps fund.

Fundraising databases for small charities are just as important as they are for larger organisations. With useful features, including automated gift aid donation reclaim, implementing CRM software for nonprofits will increase the return on investment to your fundraising efforts.

Recent statistics from HMRC revealed that charities are missing out on £560m of Gift Aid every year. This highlights not only the financial value of the scheme, but also the difficulty charities have in keeping up with this form of tax reclaim on their eligible donations.

How to Claim Gift Aid on a Donation

Using Charities Online, an online service provided by the HMRC, your registered charity will be able to claim tax repayments under the Gift Aid scheme.

To be eligible for Gift Aid, the donor must have met the following requirements when they donated;

  • Paid at least as much in Income or Capital Gains Tax in that tax year as they want to claim in Gift Aid.
  • Filled out a Gift Aid declaration form giving the charity permission to claim it on their behalf.

Often a donor may have forgotten to fill out a Gift Aid form or did not have time if they quickly donated using cash. The Gift Aid scheme does include cash donations and your organisation may still be able to claim on any cash donations of £20 or less without a gift aid form.

How long does a charity have to claim Gift Aid?
Your charity needs to claim Gift Aid for a donation within 4 years of the end of the financial period in which you received the donation. For cash donations, a gift aid claim must be made within 2 years from the collection date as outlined in the Gift Aid Small Donations Scheme.

This is great news for organisations that are beginning to claim Gift Aid donations but have not done so previously as if they meet the gift aid eligibility criteria above, a backdated claim could be successful.

How much Gift Aid can a Charity Claim?

A charity can claim Gift Aid on all donations that meet the eligibility criteria outlined by HMRC. Once a claim is submitted, it cannot be changed. The current Gift Aid scheme allows a charity to claim 25% of a donation. So, for every £1 donated, your charity can receive an extra 25p in reclaimed tax.

How long does it take to claim Gift Aid?

Although the time can vary, it currently takes HMRC 4 weeks to process a Gift Aid claim.

Gift Aid – How to Keep Track of Eligible Donations

The easiest way to organise your eligible gift aid donations is by implementing a charity CRM system into your organisation. Providing charities of all sizes a variety of useful benefits, a CRM system will transform the way your organisation stores, processes, and records data and transactions. At a basic level, a CRM system will give your business a more structured approach to relationship management – helping you build better interaction with those invested in your organisation.

A CRM system features income management tools, such as;

  • Automatic Gift Aid Claims – A selection of CRM systems streamline the process of gift aid donations by tracking qualifying donations and processing the claim submission with HMRC.
  • Reduce Admin Tasks – Streamlining the gift aid process means your employees will spend less time completing routine admin by processing gift aid claims manually.
  • Legislation Changes – As Gift Aid is a scheme through HMRC, the rules and legislation can change. A CRM will ensure you comply completely with the latest updates and will notify you of any significant changes to the Gift Aid scheme.
  • New Opportunities – Using a CRM system you can quickly identify any missed opportunities to reclaim Gift Aid – something that could be extremely easy for your team to miss if processed manually.

Gift Aid for charities is a valuable source of income and so making gift aid processing a priority to your organisation will assist in your on-going fundraising efforts.  By doing so with the help of a charity CRM, you will be able to track completely the gift aid donations you are processing and troubleshoot any issues with ease.

Though some organisations may prefer to keep track of their eligible donations manually, there are several disadvantages to doing so;

  • Time Efficiency – Time management is a crucial part of all businesses, and by keeping your staff busy tracking manual donations and gift aid eligibility, they don’t have much time to do anything else that could benefit your organisation.
  • Data Disasters – It may be something you’d never think would happen to your organisation, or it hasn’t even crossed your mind. But, data disasters do happen and they are very costly mistakes to fix. From malware to corrupted computer hard drives, if your data is affected and can’t be accessed, your organisation is unable to access important information including gift aid claims.
  • Capacity Issues – It may seem logical to track donations and gift aid claims manually at your organisation’s current size. But, if you were to suddenly grow and see an influx of donations, you should have a system in place that is ready to handle all of this extra data, and work!
  • Cloud Advantages – Most CRM systems use a cloud-storage system or can be accessed remotely. This means you do not have to access the computer that the information you need is stored on, and can instead access data on a different device. So, there are no problems if you need to pull some information about a gift aid claim, or direct debit, and you’re out of the office.

Claiming Gift Aid on Company Donations

Charities often work in partnership with businesses who regularly contribute donations to their organisation. The gift aid scheme works differently in this instance, as it is only eligible for those donations from individuals.

However, your charity can still benefit from donations given by sole traders who pay tax above the basic rate. In this case, the higher-rate taxpayer would be able to claim the difference between the basic and higher tax rate on their donation. So, a charity could claim 20% of the donation and the sole trader could also claim 20% of the donation back.

A charity CRM system will organise your donations so that you can easily understand how and what you are entitled to claim back.

The Importance of Claiming Gift Aid

Worth over £1.2 billion to the charity sector every year, Gift Aid is an incredibly valuable form of tax relief to charities. Even considering this massive figure, encouraging charities to persuade donors to tick the Gift Aid box is an ongoing challenge faced by the UK charity industry, partly thanks to general misunderstandings of the scheme.

It’s been suggested by HMRC that people still do not completely understand the Gift Aid schemes and how they affect the donor personally. Many people worry that Gift Aid will affect their tax or cost them more than they wish to donate. If charities fail to acknowledge their donors do not understand the facts about Gift Aid, then it is the charity that loses out on an extra source of income from their fundraising efforts.

With fundraising schemes evolving to meet the demands of modern donors, charities should implement Gift Aid planning into their fundraising strategies to ensure their fundraising campaign can claim as much Gift Aid as possible. For example, if your organisation was to organise a fundraising event, you could ask for a recommended donation that would be eligible to claim Gift Aid, rather than selling tickets and limiting your opportunities to make eligible Gift Aid claims for your charity.

Getting the most out of your donations and successfully claiming multiple Gift Aid claims is helped by the organisation and structure which a CRM system will bring to your charity.

Choosing a CRM System for your Charity

It can be easy to begin the search for the best CRM systems for your charity and turn first to the CRM tools developed by the big commercial corporations. The issue with this is that most of these systems, such as Salesforce, were designed to assist for-profit organisations.

Not-for-profits benefit from a range of CRM systems developed for charities and other NFP organisations. They are tailored specifically to include the special tools most useful to the needs of third-sector organisations. These include;

  • Membership and Donor Management – Build long-term and meaningful relationships with a range of tools that help you better understand how your members and donors like to be contacted, their preferred donation method, and analytics.
  • Payment Management – Easily track and organise multiple sources of income and automatically claim Gift Aid, where appropriate.
  • Direct Debit Processing – Create and update direct debit mandates and make accepting direct debit payments a quicker and easier process for both your organisation and the donor.
  • Marketing & Communication – Track the success of marketing campaigns with advanced analytics and discover the most effective communication strategies to increase donations.
  • Cross-channel Gift Aid Tracking – Reclaim tax under the Gift Aid scheme successfully with cross-channel gift aid tracking to automate the process of Gift Aid claims with HMRC from a variety of online donation sources.

Gift Aid Claims – How to Start Claiming Gift Aid

In order to be eligible to receive Gift Aid, your organisation must register with Charities Online to be able to successfully claim for Gift Aid on eligible donations.

Mast ICT help not-for-profit organisations choose and implement CRM systems to support their fundraising and marketing activities.

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