Fundraising from Companies + Charitable Trusts/Foundations & Through the Internet
The following is a Book published by Mr Gordon Owen under the pseudonym Messrs G Owen & Co on the subject of Fundraising from Companies + Charitable Trusts/Foundations & Through the Internet. A copy of this Book in Acrobat format is available for download @ £5. 00 per copy.
Where the buyer is from a charity associated with Gordon Owen Messrs G Owen & Co, 50% of the proceeds will be donated to that cause so the more copies bought/sold the greater the potential income for a voluntary group/organisation Why not buy a copy now!
- Highly personalised – [Discuss with known sources of contact]
The Five I's of Fundraising
INVESTIGATE ~ RESEARCH
INFORM ~ INTRODUCE YOUR ORGANISATION AND PROJECT
INTEREST ~ DEMONSTRATING LINKS / MEETING CRITERIA
INVOLVE ~ ENGAGING ~ INTERACTING
INVEST ~ BUILDING RELATIONSHIPS
Turning Suspects into Prospects
Steps to work through:
in depth research assessing:
- locality (national or local remit & where) size of grant - (match their capacity to your needs)
timing (match frequency of grant making to your schedule)
interests (how much commonality is there?)
looking at the bigger picture:
- degree of competition and likelihood of a grant work required to submit an application what relationship already exists
- do you have any contacts or a lead in?
a list of prospects:
- which you must check with before contacting – Consultation available via Gordon Owen
these are your potential donors!
Checklist for identifying Trusts / Foundations
Have they donated previously?
Check computer and paper records, please ask – Consultation available from Gordon Owen
What are the objectives of the Trust/Foundation?
Are we eligible to apply?
What is the giving capacity of the Trust/Foundation?
- Look at their income and expenditure what are they capable of giving?
What are the types of grants they normally give?
capital projects, scholarships, fund over several years?
What are their conditions for a grant and what are their exclusions?
- Do we have to raise some of the money before approaching them? Geographical constraints?
When do the trustees meet?
- Monthly, quarterly, as necessary? How far in advance do they like proposals?
Do they have a formal application form or guidelines?
Do they require a summary of the project first?
Who are the Trustees/Settler/Administrator?
Do we know any of them?
Do we have any Trustee contacts?
Do any of our Trustees know any of theirs? How can we make use of this?
What kind of projects do they like to fund and which part of our work is most likely to find favour?
Look at previous giving history. If unsure, seek advice from the Administrator.
How much should we ask for?
Look at previous history. If unsure, ask the Administrator.
Who is the best person to submit the application?
Director, Chairperson, Secretary, Fundraiser
Who should the letter of application be addressed to?
The Chairman of the Trustees, the Secretary, Administrator
Would the Administrator/Trustees like to visit?
- Do they ever visit applicants' projects? Would they like to visit a project as an introduction to our work?
Applying to Companies
This section gives basic information for putting together applications to companies. Some companies do have clear policies.
To make an effective appeal to industry you must have a basic understanding of why firms give. This enables you to put forward good reasons why they should support your work. Some companies in this guide receive up to 100 applications each week. You need to make a good case for yours to be successful. A company will not be particularly impressed with a general plea to 'put something back into the community'. They want something more substantial. You should be able to demonstrate a clear link with the company, be it geographical, product, employee contact, or some other connection.
~ cash donations
Why companies give? What companies give
The main reason for company giving is often said to be enlightened self interest, rather than pure altruism and they see their giving as 'community involvement' or' community investment'. The following are some of the reasons why companies’ give:-
To create goodwill. Companies like to be seen as good citizens and good neighbours, so they support local charities. They also like to create goodwill amongst employees.
To be associated with certain causes that relate to their business. Mining companies often like to support environmental projects, pharmaceutical companies health projects, banks economic development projects and so on.
~ encouraging employees to volunteer
~ providing expertise and advice
Because they are asked and it is expected of them. They know that other companies also receive appeals and give their support. They will often support trade charities such as a benevolent fund or an industry research organisation; beyond that they will probably pitch their level of giving more or less at that of their rivals.
Because the Chairperson or other senior managers have a personal interest in that cause, this is particularly the case for smaller companies. Even where a company has well established criteria for giving, if you can get a friend of the Managing Director to ask on your behalf, you are more likely to get a donation, even when your cause does not exactly fit those criteria.
If you can find a link between one of your supporters and a particular company use it.
Generally it is worth emphasising the sheer chaos of company giving. Few companies have any real policy for their charitable giving. Mostly they cover a wide range of good causes or attempt to deal with each appeal on its merits.
However, some companies do have a clear policy. Where policies are printed please respect them; dealing with a mass of clearly inappropriately applications is the single biggest headache in corporate giving and has caused some to consider winding-up their charitable support programmes altogether. Users (or their parents) may work for the company.
What companies give?
It will prove useful for them to write or sign the appeal letter.
There are a variety of ways in which companies can support charities:-
cash donations;
sponsorship of an event or activity; ~ sponsorship of an event or activity
sponsorship of promotional and educational materials;
sponsorship of an award scheme;
joint promotions, where the company contributes a donation to the charity in return for each product sold in order to encourage sales;
making company facilities available;
secondment of a member of staff, where a member of the company's staff helps on an agreed basis whilst remaining employed (and paid) by the company;
contributing a senior member of staff to the charity's Management Board;
providing expertise and advice;
encouraging employees to volunteer;
organising a fundraising campaign amongst employees;
advertising in charity brochures and publications.
Key factors in approaching companies
Research
Research is very important, not just into companies, but also into personal contacts. When planning an appeal, an important first step is to find which of the people associated with your charity have influence or know people who have. If you can find a link between one of your supporters and a particular company, again, use it.
One of your trustees/members may be on the board of directors or have contacts there. It will prove useful for them to write or sign the appeal letter.
One of your volunteers or supporters may be an
Employee of the company.
Your clients/users (or their parents) may work for the company.
Alternatively, you might be able to tie your appeal in to a known personal interest of a director.
Getting in touch
Generally an appeal through a personal contact will work the best. But if you haven't got a contact and can see no way of developing one, then you will have to come up with another link.
As a first step you might contact the company to find out the following:-
who is responsible for dealing with charitable appeals
their name and job title
what information they can send regarding their company
any procedure or timetable for submitting applications
whether they might be interested in coming to see your organisation at work.
Visits are useful when discussing bigger donations with the larger companies, but are difficult to arrange for anything small.
Almost certainly your appeal will be in the form of a letter. Make this as personal as you can. Circular letters tend to end up in the bin. Make the letter short and to the point.
Be specific in your approach
Rather than sending out a circular mailing to 100 or 1,000 companies, you will be more successful if you select a few companies you believe will be particularly interested in your project, and target your application to them and their policy. (Many companies will not consider circular appeals as a point of policy).
Find a good reason why you believe the company should support you and include this prominently in your letter. You may be able to relate what you are doing as a charity to companies which have some relevance to your work; for example, a children’s charity can appeal to companies, making children’s products companies, a housing charity to construction companies, building societies, etc. Any relationship, however tenuous, creates a point of contact on which you can build a good case for obtaining the company’s support. If there is no relationship, should you be approaching that company at all?
There may be occasions where a charity will not want to accept money from a company in a related company's support. If there is no relationship, should you be approaching that company at all? A health education charity may not want to accept money from a tobacco or brewery company or from the confectionery industry, or similarly an environmental group may not wish to accept a donation from a nuclear power company. These may feel that as a result of doing so they would be seen to be compromised. Similarly, a local charity might not want money from a company who has made people in the area redundant. Each charity has to judge where it draws the line.
Be clear about why you need the money
You must be clear about the objectives of the work you are raising money for, particularly its time scale and how it relates to your overall programme of work. Try to think in project terms rather than seeking money to cover basic administration costs. This can be difficult, because most people spend most of their money on administration in one form or another, so you need to conjure up projects out of your current activities to present to potential donors. You can build a percentage of administrative costs into the costs of the project. If you relate what you are doing to a specific time-scale, this again makes what you are applying for more of a project than a contribution to your year-on-year core costs.
Be persistent
Do not underestimate the persistence factor. If you do not receive a donation in the first year, do not assume that the company will never support you. Go back a second and even a third time.
If you are going back, mention the fact that you have applied to them previously, perhaps saying that you are now presenting them with something different which may be (you hope) of more interest to them.
If they give you reasons for refusing support, use them to help you put in more appropriate applications in the future. If they said that they do not give to your particular type of activity then you know that it is absolutely no use your going back. If they said their funds were fully committed, you can try to find out when would be a better time to apply (although it might only have been a convenient excuse because they did not want to give to you).
Note the response to your appeal and use any information you can glean to improve your chances the next time. People respect persistence, so it really is important to go back again and again.
How to find out which firms to approach?
The firms to approach must depend on what sort of organisation you are. If you are a national organisation then an appeal to the country's leading companies is appropriate. Local groups should approach local firms and local branches of national companies which have a presence in their area. All organisations can approach companies in allied fields: for example, theatres can appeal to fabric companies.
You will find the names and other details of companies in a whole series of useful directories and publications.
Whichever directories you are using make sure they are up to date copies. Company personnel and/or donations policies change regularly.
If you want gifts in kind, you should find likely suppliers of what you need. Trade associations will often provide a list of its member companies. Another idea is trade list of its member companies. Another idea is trade exhibition catalogues which give details of all exhibitors.
One big problem is the ownership of seemingly independent companies. Many companies are in fact a part of a much larger concern. In recent years there has been a substantial number of mergers and take overs, plus the buying and selling of business between corporations. A useful source of information is the directory Who Owns Whom, which has a subsidiary index listing most subsidiaries of companies included in the guide. You can also use company annual reports, which (for most companies) can be obtained on request. These reports provide good background information on the company, and occasionally information on the company's corporate support programme. Some private (and occasionally public) companies will not send out annual reports except to shareholders; in such cases you can go to Companies House to get hold of a copy. The main offices are situated in Cardiff, Edinburgh, Belfast and London, with satellite offices in Birmingham, Glasgow, Leeds and Manchester.
Finally there are national and local newspapers which can provide useful information and ideas about who to approach. Informal sources or information may include the local business school, rotary, round table, Chamber of Commerce, Business Breakfast Clubs, as well as clients of your auditor, banker, legal advisor or suppliers.
The types of companies that give
Foreign owned multi-national companies
Many of the large multi-nationals have global giving programmes. Some have an international structure for managing their giving with budgets set for each country and a common policy for the sorts of activity they are interested in supporting. small budget to spend on charitable projects of its choice. Others may give each country a small budget to spend on charitable projects of its choice. With others, community involvement policy remains a purely local matter for company management in the country concerned.
Leading national companies
Many support large national charities, of which many have departments set up to raise money from companies. Some make grants through regional offices and most will give preference to charities local to their main operating sites.
Larger local companies
In any city or region there will be large companies who are important to the local economy. These companies will often feel a responsibility to do something to support voluntary action and community initiatives in those areas, and value the good publicity that this will provide. It is a good idea to form some kind of relationship with larger companies in your area.
There are also companies that have a regional remit, such as water, electricity and television companies. The support of these companies is usually confined within these regional boundaries.
Smaller local companies
Almost everyone is targeting the large companies, because good information is available on these for fundraisers and there is little available information on smaller local companies. Many of these are privately owned and the approach will often be through the ‘Chairman & Chief Executive’ or ‘Managing Director’, or ‘Senior Partner’. Most of these companies will have no policies about what to give to and may prefer to give in kind, for example a prize for a raffle, or a fundraising event. It might be easier to approach these companies for this sort of support in the first instance; and later on, (once they have given something), to persuade them to make a cash donation.
Constructing an Appeal Letter
Important points to consider:-
Think up a project or aspect of your work that the business sector might like to support. Generally, do not appeal for administration costs or a contribution to an endowment fund (although there will be cases where this approach will succeed). Recognise that companies are likely to be interested in some ideas and not others. For example, a drugs charity would be more likely to get money for education than rehabilitation. An appreciation of the kind of projects that companies like to support will be very helpful to you.
Your letter should be as short as possible. Try to get it all on one side of A4. You can always supply other information as attachments. Company people are busy. You can help them by making your appeal letter short and to the point. It should be written clearly and concisely and be free from jargon. Someone not acquainted with what you are doing should be able to read and understand it and be persuaded to act on it. Give your letter in draft to someone outside your charity to read and comment on before finalising it and sending it out.
You should state why you need the money and exactly how it will be spent. The letter itself should be straightforward. It should include the following information (not necessarily in this order): what the organisation does and some background on how it was set up; whom the organisation serves; why the organisation needs funds; how the donation would be spent if it were to be forthcoming, and why you think the company might be interested in supporting you.
You should attempt to communicate the urgency of your appeal. Fundraising is an intensively competitive business; there is a limited amount of money to give have to ensure that some of it comes your way. If it appears that although you would like the money now it would not matter terribly much if you got it next year, this will put people off. But don't give the impression you are fundraising at the last minute. Show them you are professional and you have carefully planned your fundraising appeal. You should also try to show that your charity is well run, efficient and cost¬ effective in how it operates.
You should mention why you think the company should support your cause. This could range from rather generalised notions of corporate responsibility and the creation of goodwill in the local community to much more specific advantages such as preventing children painting graffiti on their factory walls or the good publicity companies will get from supporting your cause. If the firm's generosity is to be made public, for example through advertising or any publicity arising from the gift, then emphasise the goodwill which will accrue to the company. Most companies would say that they do not require any public acknowledgement for the contributions they make, but most will appreciate and welcome this.
As for something specific. It is all too easy to make a good case and then to mumble something about needing money. Many companies, having been persuaded to give, are not sure how much to give. You can ask them to give a donation of a specific amount, (matched to what you believe their ability to contribute to be), or to contribute the cost of a particular item. You can suggest a figure by mentioning what other companies are giving. You can mention a total and say how many donations you will need to achieve this. Do not be unreasonable in your expectations. Just because a company is large and rich, it does not mean that it makes big grants.
If you can demonstrate some form of’ leverage' this will be an added attraction. Company donations on the whole are quite modest, but companies like to feel they are having a substantial impact with the money they spend. If you can show that a small amount of money will enable a much larger project to go ahead, or will release further funds say on a matching basis from another source, this will definitely be an advantage.
Having written a very short appeal letter, you can append some background support literature. This should not be a fifty page treatise outlining your latest policies, but like your letter it should be crisp and to the point, a record of your achievements, your latest annual report, press cuttings or even a specially produced brochure to accompany your appeal.
Make sure that the letter is addressed to the correct person at or the correct address. It pays to do this background research. Keep all the information on file as it will make your job much easier next time.
If you are successful, remember to say thank you; this is an elementary courtesy which is too often forgotten. If the company gives you any substantial amount of money, then you should probably try to keep them in touch with the achievements related to their donation (such as a between the lines. Companies in trying to be polite may in brief progress report or copies of your annual report or latest publications).
If you do not succeed, go back again next year (unless they say that it is not their policy to support your type of Organisation or to give to charity at all). Persistence can pay. If you have received a donation, go back again next year. The company has demonstrated that it is interested in what you are doing and in supporting you. It may well do it again next year, especially if you had thanked them for the donation and kept them in touch with how the 'project' developed.
How companies reply to you
Many companies will not even reply to your appeal. A few may acknowledge receipt of your letter, and occasionally you will get thanked for your request and be told that it is being considered and you will only hear the outcome if you are successful. Up to half of the companies you approach will write back depending on the spread of the companies you approach. Larger companies have a system for dealing with charity mail, and most will see it as good PR to give a reply. Smaller companies which are not giving much charitable support will not have the time or the resources to do anything but scan the mail and throw most of it in the bin.
What sort of reply should you expect? If you do an extensive appeal, you will inevitably get a lot of refusals. These will normally be in the form of a pre printed or word processed letter or a postcard. Occasionally you will get an individually typed letter of reply. If they say yes, you will get a cheque or a Charities Aid Foundation Charities Trust voucher. But more often they will say no. There may be various reasons given or phrases used by a company for refusing your request. The company may not mean what it says. Funds may still be available for those appeals the company wishes to support; the company may be able to give support and just not want to; or it may not want to now or in the future. You should try to read fact be misleading you if you take what they say at face value.
PREPARTION # HOME WORK
Identify the need and research study
What is exactly required
Why the need
Who will benefit
Provide facts and figures to support the need; area in which it will operate; and the people it is aimed to aid.
Provide all data to grant body in advance to study.
Support with presentation summary + any graphical material possible -
if a building - a visual drawing of what will look like
if children - photo of them showing expression of disappointment of not having the ability to benefit and image the excitement of what the expression would be from the benefits and skills achieved from meeting that need.
Create & develop positive image of the scheme
Publicly & material
Costings - Broken down into Capital & Revenue - Budgets - Projections
Shopping list of anything in terms of good needed (with costs) to enable smaller potential contributors to be able to support and be able to identify specifically with what they have given in support.
Who appeals will be target at:-
- Trust / Companies / Central & Local Government Departments/ Lottery / Euro funding
Prepare appeal letters and supporting material:-
- Identify voluntary & statutory authorities who will be invited to be involved. - Identify any other useful contacts to help achieve goals. - Programme - Time-table - Development Plan - Enables (a) Monitoring; & (b) Determine strategies to achieve goals
Case Study # Example:
Newham Youth Lodge Hostel Project:
Picture for a moment the expression of a child’s face and what might be going through their minds reading an airline magazine on holiday about other children travelling abroad on exchange trips. Imagine their thoughts when such opportunities are disappointingly not been available to them.
Given the opportunity and resources that this project provides - Imagine - the expression of excitement and happiness on the face of a child who is told - here is a chance for you to participate.
Think of the educational and cultural value helping them to understand and value others as people.
Determine need:
- What is the Project?
An outer London Borough.with a population of around 27,100 - high-rise flats, terraced housing. But it is home to the people and families. The people live happily engaging in professions, activities and interests with a host of skills. Along side this for the young are some 200+ youth clubs & organisations that make-up the youth service in the Borough.
Trips to a variety of places in and around London, counties and even countries are organised by different youth organisations - to sight see, bike, camp and so on. We visit these places but rarely do we have the time, chance or inclination to meet, talk and live in these places for educational trips.
The hostel currently provides accommodation to enable educational exchange trips to be complimented in situations where reciprocal visits are not possible because families do not have the space to accommodate visiting people from other counties and countries. It is designed and caters for groups of between 12 - 30 people, as distinct from individuals.
Work Involved -- Historically:
Sought assistance from Local Authority Architects to produce conceptual drawing to create visual concept of what the building would look like once converted.
Negotiated Lease & Building Agreement for 15 years (with option to continue) with the Local Authority - therefore have the land.
Engaged (at no cost), Architects & Quantity Surveyors to design and cost-out the building works of existing phase I of the project
Worked with architects and QS to prepare works specifications and tenders. Liaised and work with final appointed contractors and sub-contractors to complete works.
Worked through processes to expedite Building Regulations approval and Planning Permission.
The Phase I initial official opening was so successful that no less then 50 Trusts alone, apart from another 100+ dignatories attended securing relationships for the future in terms of support and future funding. Some even offered more help at the time and subsequently helped again.
Had a scale model of the building made to exhibit for consultation with youth organisations and schools in the Borough. Also took this model to some presentation meetings with Trusts. Proved successful.
Other promotional and publicity produced to include brochures with list of contacts to arrange direct exchanges, information on hostelling and graphics/photos. Plus: translated material languages + in Braille for the blind. Initiated and designed logos to project image of the project.
Met and subsequently registered with the English/London Tourist Board and British Tourist Authority who included the project in their handbooks translated for a number of countries to generate interest and future use. This task has successfully underpinned revenue income.
Feedback from youth groups and schools were initially mixed but enough to qualify the project being forthcoming. Clearly the building would be used - others uncertainties from some potential users with in-house commitments - later a significant number of these came on board and participated. Visits made to each group to coordinate.
Secured arrangements with local City airport for groups and have made many visits using the airport to discuss future arrangements.
During the VE/VJ commemorations earlier this decade, worked in partnership with the International Duke of Edinburgh’s Award and hosted a group of people from some 14 countries around the world and an informal dinner for some 150. Co-ordinated arrangements with the main activities in Hyde Park and arranged trips for visitors. So successful was this venture that an invitation from the Duke of Edinburgh and Prince Edward to attend a Garden Party at Buckingham Palace was received and attended.
Thousands of people, representing youth groups from all over Europe, Asia, Africa, Scandinavia, US, Canada, Australia and latterly the former Eastern block now visited the Borough putting them and the Organisation clearly on the map - moreover, think of the children & young people who benefited as a result from the Borough!
Funding:
Feasibility Study [So as to be official recognised and accredited] - Grant-aided by CAF.
Made shopping list of items required within the building to furbish, equip and furnish hostel. Sent this list to an initial host of some 500 manufacturing companies with information about the project, a brochure and covering appeal letter.
Prepared and submitted grant-aid applications to the Local Authority, Department of the Environment and a variety of Trusts researched for initial funding required of £250k. Applications were successful and total monies needed raised. Building also took on needs for disabled and separate funding secured to provide for this, e.g. wider doors, disabled toilets & showers, ramp, easier access to phone etc.
Before the decision of this was known a quarter of the manufacturing companies written to had positively responded pledging a variety of furnishings and goods for the buildings, including carpet tiles, bunk beds, office equipment, kitchen equipment etc.
Successfully secured sponsorship from the British Council to personally visit the Boroughs twin-town in Germany to carry out study and to promote the project. This included producing a brochure translated in German to distribute. Subsequent to approval, received invitation to be a civic guest of the town by the Oberburgermeister (Lord Mayor). In the early stages we spent fruitful week visiting hostels and youth groups in and around town.
Secured a scholarship through the Churchill Foundation to extend study to the US and visited a variety of hostels operated and again promoted project.
Conceived idea of aesthetically improving the external of the building by introducing figurative murals on the external walls. Engaged an artist to produce concept ideas based on the history of the Borough. Later secured monies and paints/materials to bring this to reality and some 7 No. 12ft high murals painted based on different historical elements of the Borough - introducing a new element in terms of companies/organisations who would otherwise not have become involved and who were interested - plus excellent publicity! This included dealing with all the processes for further Planning Permission with the Local Authority.
Secured revenue funding from the former LDDC for salary to employ first member of staff, e.g. Administrative Secretary to facilitate the project. Prepared job advert and job description/ specification + contract for this post.
The project has provided a real need for almost two decades. Now reached a cross-road with entire site under a new development with the intention of demolishing school and hostel and build purpose built accommodation - exciting future ahead.
The purpose built hostel for international youth exchanges cost a quarter of a million pounds. The research and evidence (filling a A4 lever arch folder) in support of this has been supplied.
Equipping & furnishing was not be such a costly task with existing resources from the current building being moved into the new complex when complete. The upgrading and replacing old items was achieved so as to suitable compliment the needs of the new building.
The work created by the Project has moved on with the site on which the Youth Lodge Hostel was based being redeveloped and a purpose built location being established as a consequence of its success - changing to meet the needs of the youth of today!
FROM THE DONOR'S POINT OF VIEW
Is this project within our policy, priorities and area of benefit?
Is it clear what do they want, why and when?
How do we know they can do it?
Who are they do we know this organisation?
What are the implications for the future?
Has anyone else supported this project?
Do we expect to get anything in return?
10 Top Tips
1] Address your appeal to the right person
2] Tailor your appeal to the prospect
3] Include a clear statement of Organisation's work and objectives
4] State clearly how much money you need and include a budget
5] Tell them what the money's for
6] Break a large appeal down into realistic chunks for particular items
7] Include the latest accounts
8] Offer to go and see them and follow up the letter within a week
9] State the benefits for them
10] Be positive and upbeat about the Organisation and your ideas
GETTING BEYOND THE WASTEPAPER BIN!
PLAN AHEAD
Think in terms of months not weeks
trusts may meet only twice a year;
sponsorship budgets may be committed 18 months ahead.
RESEARCH THE DONOR
Read up on their policy and priorities.
How much do they normally give?
Find out the right contact name
When is the best time to apply?
Do they issue guidelines
How do they like to be approached?
PACKAGE YOUR PROJECT
Identify unique selling points
Package specific needs
Prepare a proper budget
Is it cash you need?
Is it sponsorship or a donation?
Consider unit costs or a choice of costs
Sponsorship benefits
PLAN THE PROPOSAL
Organise your information
Gather supporting documents
Decide on a format
NOW YOU CAN WRITE IT!
Avoid jargon
Bring out human interest
Generate emotion, belief and commitment
Break up the text & include a summary
Do not forget enclosures
Common Pitfalls
Dear sir/madam. There is no excuse for not addressing a named correspondent and preferably the correct name! Circulars waste time and money.
Long winded and vague appeal letters. Be concise and precise most letters will be scanned.
Not understanding the commercial world. Companies want to know what they will get out of it. Companies expect some good publicity, even from a donation.
Not stating what you want. Many appeals give lots of information, but the donor is left wondering what you actually want from them. Be very clear what you are asking for and why.
Insufficient time. Plan ahead and appeal in good time. If you want the money next week it suggests bad planning,
Wrong address. Appeals may end up on the right desk, but a two week delay is unhelpful and creates a bad impression.
Tactical error. When sending photographs to Kodak in support of an appeal, do not send a Fuji film!
Not valuing their time. Applications should consist of a short letter. Do not say all the information is in the enclosed video!
Being unrealistic in what you ask for.
Lack of professionalism. Appeals, particularly by telephone need to be carefully thought through. Trying to make them feel guilty rarely produces a positive response.
WRITING YOUR APPLICATION
EXECUTIVE SUMMARY A brief outline of the proposal
Problem
Solution
Funding requirements
Organisation and its expertise
THE STATEMENT OF NEED Why is this project necessary?
The problem evidence of need, facts and statistics
Who are you helping? comments and quotes from beneficiary group/s
Why is the issue important?
What would be the consequences if nothing was done to address the need?
PROJECT DESCRIPTION Nuts and bolts Show the project will be implemented
Objectives
Methods
Staffing and administration
Monitoring and Evaluation
BENEFITS FOR THE PROSPECTIVE DONOR what will they get out of it?
Business benefits, e.g. value of press coverage and PR
Corporate citizenship, and how it fits with their aims
Opportunities for employee involvement through volunteering
Opportunities for in store/branch promotion
Branding on promotional materials
Networking and contact with key government figures
BUDGET Financial description of the project
How much the project will cost in total?
How much will you need from the funder?
Income already received or expected
ORGANISATION INFORMATION Introduction and background to your Organisation
History
Main activities
Location and size
Aims and objectives
Beneficiaries and services
CONCLUSION - Summary of the proposal 's main points
Final appeal for your project
Some tips on writing style
Use shorter sentences and avoid overly complicated sentences
Use a PC/Mac and the spell and grammer check! Be sure to set to 'English UK' Language and NOT English US.
Include a summary
Improve the visual appearance and readability by using shorter paragraphs, headings, sub headings and indented tabulations
Ask someone to check it for errors, typos and clarity
Vary the length of sentences and paragraphs it makes it easier on the eye and helps the reader
Use smaller rather than longer words
do not forget the enclosures!
Avoid unsubstantiated superlatives, such as woefully inadequate
Avoid jargon. Write as though you are presenting the information to a friend who has no knowledge of what you do
Write for the reader, with an understanding of their level of knowledge and their perception of the issue
Avoid the use of words or concepts that may be controversial
KISS keep it short and simple, but say all that you need to say. They may have stacks of requests to sift through
Make it clear and logical
Then What?
KEEP TRACK
When is a decision likely?
NO REPLY?
Try a gentle prompt
YES
Thank them!
- Report back (interest) Invite to visit (involve) Send Action etc – [inform]
NO
Thank them!
- Speak to them (interest) Invite to visit/meet (involve) Send Action etc – [inform]
REPORTING PROCEDURES
Keep the funder informed of the progress of the work
Follow any given reporting guidelines/requirements.
If these are not clear, clarify with the funder.
Ensure you report to the funder on time.
Invite the funder to become involved where appropriate (attending launch events etc).
Keep reporting information brief and to the point, with a fuller report at the end of the grant, including whether the objectives of the work were met.
Enclose relevant information with your report such as financial update, publicity materials and photographs.
Offer the funder the opportunity to discuss the work or to request more information at any time.
If there are problems with the work, keep the funder fully informed.
If you are planning any changes to the way you are going to spend the money from what was originally proposed, seek the funder’s permission first. Be prepared to change your plans or payback the money if they decline permission.
Inform the funder of any key staff changes or funding information.
ICF INTERNET FUNDRAISING GUIDELINES
Please see our web page - [Click on our logo]:
ICF FUNDRAISING USING YOUR CHARITY'S INTERNET PRESENCE
Please also see our web page - [Click on our logo]:
FUNDRAISING USING A THIRD-PARTY'S INTERNET PRESENCE
Practical
Charities are receiving offers from third-party organisations such as companies and non-profits to provide online fundraising services. These include online shopping malls, cause related marketing programmes, online events management, donation handling services and many other services.
To assess the benefits of proposals from such third-party organisations it is worth considering the following:-
Avoid signing exclusivity agreements as these can limit your charity's options. Is the organisation's contract flexible enough to cover your charity's requirements and concerns? Will the organisation adapt it to meet your needs? Would you as an individual buy in to the proposed service? Can you work with the staff at the organisation? With new start-up companies without a track record, this can be one of the few key elements on which you can judge them. Will the site be accessible to people with disabilities using the Web? Do not deny yourself a large market: for example, 1.7 million people in the UK have serious uncorrectable sight loss. Is the organisation aware of the Web site amendments required to address this issue, and will they undertake to address them? Promote accessibility of all fundraising materials to all Internet users irrespective of disability. Ensure reasonable backward compatibility of material with regard to browser software and type of hardware. This is most easily done by providing a text only version of the site. RNIB publishes guidelines Alternatively, sites can be checked using a free service from CAST:
Conduct due diligence checks to find out if the organisation and its business are sustainable. How is it funded? What commitments does it owe to its financial backers and shareholders? Is its business plan realistic? Seek references from the organisation's bank and from other participating charities and business partners where possible. What does the organisation ask of participating charities in terms of marketing? Is the marketing planned by the organisation realistic and sustainable? Avoid organisations that expect charities to conduct all the marketing activity on their behalf. Can the organisation provide you with statistical reports on the number and quality of visitors generated by its marketing? How will you allow your charity's name and brand to be used by the organisation in its efforts at audience acquisition?
Is there a limit on the number of charities or the number per market sector? On some sites this will increase income for participating charities, on others it will limit it. Does the organisation's site take other forms of online payment in addition to credit cards e.g. direct debit payments from bank accounts? This could expand the number of supporters likely to make an online transaction at the site. Have they taken into account tax efficiency issues and are they able to offer online tax reclamation of any donations? What is unique about the organisation's offer? Why should your charity work with them and not similar online fundraising companies? With regard to trading Web sites, does the organisation offer a customer charter covering issues such as their delivery commitments and their returns and/or refund policy? Is this acceptable? What is the revenue split in shared revenue schemes between the organisation and your charity? How long will it take the money to reach your bank account? Does your charity incur any costs e.g. for marketing, bank fees, receipts of acknowledgements to donors? Does your charity need to consider acquiring insurance or indemnities with regard to liability? Consider preparing a response to offers and enquiries from Internet fundraising companies. Set out your fundraising plans and minimum requirements from organisations you are prepared to work with. For example, do you have ethical trading criteria? What documents do you expect to see from an organisation? This checklist will help you assess approaches made. A response to an approach from an online fundraising organisation could be: Compare the proposal with your charity's checklist e.g. exclusivity, financial data, ethical concerns, your fundraising priorities. Educate them and request that they submit a proposal specifically for you. Evaluate the proposal and decide on the options available. If you decide to continue, perform due diligence and sign a contract that reflects your charity's requirements. ICF recommends that you take care not to confuse offers and arrangements with dotcoms or commercial services providers as philanthropic initiatives. Avoid services where the company cannot offer you some evidence of its sustainability and audience potential. These things can be more time-consuming and wasteful than they appear at first!
Contracts
Contracts can be time-consuming and difficult to understand. The Internet arena is no exception. All the more reason to exercise due diligence and consult with others to ensure that you are comfortable with what you are signing up to and that you are being treated fairly.
ICF recommends that you show any agreement to your charity's compliance officer, financial director, legal firm or insurance company before signing. Consider drawing up your own contract or seek amendments to the standard contract offered by the organisation.
Avoid signing Non Disclosure Agreements. Consider offering written confirmation that all conversations, whilst active, are commercial and in confidence and will not be shared. Contracts with online fundraising organisations may need to comply with the Charities Act 1992 and its definitions of commercial participator or professional fundraiser. In these cases, the obligations to make statements and have agreements covering minimum terms will apply.
Be clear what your charity's liability could be should anything go wrong. A formal agreement should specify the degree of liability which the Internet-based service provider assumes to the donor, the charity and third parties for information, transaction handling and losses related to the Internet-based service provider's administration of a donation. Consider financial losses and brand reputation. Include a termination clause in the Service Level Agreement, such that the contract can be terminated if customers are not receiving a sufficiently high quality of service. Immediate termination should come into place if the partner brings the charity's name into disrepute, and income from existing customers should still be protected even though the active agreement fails. Contracts should specify explicitly data ownership, not only of standard personal data but also of related data e.g. tracking of individuals' preferences and movements throughout a site via cookies and other methods. Contracts regarding licensing or syndicating content should include delineating responsibility for a charity's content on an external/third-party site. In certain cases, service level agreements should be established. These should make clear issues such as:-
Will you have a dedicated account manager?
If yes, how many other accounts does he/she manage?
Can you speak directly to the technical support team?
What levels of service are guaranteed?
How are you compensated if they are not met?
How important is your organisation to the supplier? If your business accounts for less than 0.1% of the supplier's turnover, you are unlikely to receive a premium service so you might do better with a smaller supplier.
Some relevant legislation
- Computer Misuse Act 1990 - Data Protection Act 1998 - Copyright Designs and Patents Act 1988 - Consumer Protection (Contracts Concluded by Means of Distance Communication) - Regulations 2000 - Broadcasting Act 1990 - Contempt of Court Act 1981 - Universal Copyright Convention, Geneva 1952 - Berne Convention for the Protection of Literary and Artistic Works, Berne 1886
Useful Resources
- High-Tech Dictionary from ComputerUser
- Charities Aid Foundation - (Telephone: 01732 520 000)
- Charity Commission for England and Wales - (Telephone: 0870 333 0123)
- Data Protection guidance. - (Telephone: 01625 545745)
- Messrs G Owen & Co - (Telephone: 0845 0958 225)
- UK Fundraising - (Telephone: 020 8640 5233)
- Horwath Consulting - (Telephone: 020 7583 1577)
- RNIB's advice on accessibility in electronic publishing - (Telephone: 0845 766 9999)
- Scottish Council for Voluntary Organisations - (Telephone: 0131 313 2488)
- help in constructing an online policy document.
- fundraising
- Government sponsored fundraising site
- fundraising site
- All about Gift Aid
- Donating via the Web
- Buying gift vouchers for family/friend - % goes to charity
- Tax concessions on giving via the Payroll
- Donating via the Web
- Details about charities & donors
- Fundraising collection boxes
- fundraising database
- Web Site ISP
- Graphics & Web Tutorials
- Graphics & Web Tutorials
APPENDIX 1
Choosing a secure online credit card processor
The level of service, security and customer care offered by online credit/debit card processors varies dramatically. When choosing an online credit card processor, it would be advisable to ask the following questions:-
Range of services
1. Do they process both credit and debit cards, including Switch cards? It is advisable to go with a supplier that processes both.
2. Can they process donations of any amount? Or is there a minimum amount? It's advisable to go with a company that offers a zero floor limit. Does the usage charge increase for small payments?
3. Do they process in multiple currencies? If you choose to process only pounds (you are charged for each additional currency), this does not mean that people using foreign credit cards won't be able to donate, it just means that all donations will be made in pound amounts and the donor will have to do the maths. Do they charge extra for processing multiple currencies?
4. Can they process tax efficient donations e.g. Gift Aid donations? Very few online credit card processing systems are designed with charities in mind - it is advisable to ensure that the company you chose can meet your special requirements.
5. Do they offer paperless direct debit? Very few online credit card processors currently do. This may also have a very high set-up and running cost.
6. Can they process transactions where donors have come straight into the donation page from an affiliated web site (this can cause security issues, so needs to be carefully handled).
Security
1. Do they process credit card payments for gambling or pornography web sites? The majority of online fraud occurs in these areas and charities may choose to avoid online credit card processors that are involved in these industries.
2. When credit card payments are processed, what kind of security is in operation?
Is online live authorisation of cards (involving no storage of details) sent over a Secure Sockets Layer-encrypted (secure) link? Are all card details inputted on their site sent through both offline (expiry date and hot/stolen card server) and on-line (hot/stolen card server, sufficient funds, authorisation) to prevent use of stolen or lost cards on their site?
Can a maximum number of failed attempts to make a donation with one credit card be set?
Can a maximum number of successful donations made with one credit card be set?
Can a maximum number of failed attempts to make a donation from one IP address, which details the location of a specific computer, be set?
Is the donor's e-mail address validated before the credit card is authorised?
Fraud
1. Credit card fraud is a major problem on the Internet. Fraudsters typically obtain credit from lists of stolen cards published on the Internet, or by using illicit programmes to produce lists of algorithmically allowable card numbers. Fraudsters use charity sites to test stolen credit card numbers, because they don't have to go through the lengthy process of purchasing a product. Once they've used you to authorise a card, they'll abuse it on other sites.
2. It is currently against the Data Protection Act in the UK and Germany to capture and cross-reference someone's postal address with his or her credit card number on the Internet. As a result the billing address of credit cards used online are not verified by the online credit card processing company. Because this law has made online fraud in the UK and Germany easy, the credit card companies, banks and UK government are currently re-evaluating the law. It may be revoked in April 2002. In the mean time, if you plan to ship goods to someone who has purchased them via your Web site, you should always verify that the address provided is the billing address associated with the credit card.
3. When should you be suspicious that a donation could be fraudulent?
The same credit card number is being used from different countries.
The same e-mail address is being used in conjunction with different credit card numbers.
The same postal address is being used in conjunction with different credit card numbers.
Many donations are made in rapid succession from the same IP address (an IP address details the location of a specific computer).
The donation is very small (£1 donations should be carefully examined).
A free web-based e-mail address is used, such as Hotmail. Many are legitimate, but when combined with any of the above the donation should be very carefully examined.
The e-mail address does not match the IP address of the machine the donation was made from.
4. If credit card fraud occurs, what can your online credit card processing company do to stop it? Can they:-
Block the fraudster's IP address? Remember that the computer could be located in an Internet cafe, or large organisation such as AOL or Wanadoo, where many computers can appear to have the same IP address. Block the fraudster's e-mail address? Most fraudsters’ use free, Web based e-Mail such as Hotmail -- some online credit card processors will send you a warning when a donation has been made by somebody using this kind of e-mail address.
Implement an intelligent software system that develops a profile of typical donor behavioural patterns and warns you if a donor's behaviour varies from this norm?
If fraudsters continued to use stolen credit card numbers to purchase products or make donations to your organisation, can the online credit card processor implement what is known as a deferred payment system? Deferred payment systems ring fence funds that have been donated on the individual's credit card -- but do not actually debit the card for five days. During this time the charity can decide whether it thinks the donation is fraudulent or not. If the charity thinks the donation is fraudulent, it can un-ring fence the funds. If it thinks it is genuine, it can debit the card. However, fundraisers should be aware that this procedure could add significantly to the administrative burden.
Although online credit card processing companies are not liable for credit card fraud, it would be advisable to ensure that your contract with them states that they will do everything in their power to limit fraud and to co-operate with your bank and international police to track down fraudsters, once they have been identified.
5. If credit card fraud occurs, what should you do to stop it?
Report the stolen card numbers to your bank.
Reimburse the cards that have been fraudulently used.
Ask your online credit card processing company to block the fraudsters' e-mail and IP addresses.
Implement a deferred payment system if the fraud continues
Administration
What kind of online administrative systems are provided?
Can you edit the layout and content of your secure payment pages via the Internet?
Can you use this system to launch one or more new appeals in a matter of minutes?
How many appeals can you run simultaneously?
Can they be different e.g. one-off donations, prompted levels of giving, direct debit/regular gifts?
If you are a membership organisation, how many membership ID numbers can they provide you with?
Can you view reports about the number, quantity, and origin (donor details) of donations online at your convenience?
Can you reimburse credit cards that have been fraudulently debited via the online system?
Can you reimburse credit / debit cards for other reasons, not only due to fraudulent use?
Can you utilise the deferred payment system online to un-ring-fence or claim donations?
What kind of security at your charity and at the payment service provider is used to ensure that only authorised personnel have access to the above systems? Passwords? Certificates (digital)? Certain IP addresses only?
Reports
- What kind of confirmation does a donor receive after having made a donation? - An e-Mail sent instantly by the credit card processing system? - Can this e-mail be customised or changed? - Can your charity do this over the Web? - Is there a charge for this? - How long does the change take to effect? - Can different e-mails be sent to different people?
How do they report back to you about donations:-
- Is an e-mail sent to you every time a donation is made? - Is a daily report e-mailed to you about all the donations that have been made that day? - Is a monthly report e-mailed to you about all the donations have been made that month? - What information is provided about donors? - IP address? Resolved IP address? - How are the donation reports formatted? It is advisable to ensure that the online credit card processing company can supply you with reports in a format that is compatible with your internal donor database so that every record doesn't have to be keyed in by hand.
APPENDIX 2
Glossary
Encryption: a method of encoding sensitive data, such as donor records and credit card numbers, so that it might be stored or transmitted safely.
Extranet: A private or restricted access computer network usually operated by an organisation. Unlike an intranet, an extranet is made accessible to other relevant organisations or individuals such as suppliers as well as to the organisation's employees.
Internet Protocol: A standard method of naming and identifying a particular computer connected to the Internet using a unique series of numbers. The shorthand IP is more common.
Intranet: A private restricted access computer network usually operated by an organisation. Information is stored and retrieved in the same method as the Internet but access is restricted usually to company employees.
IP: see Internet Protocol.
Meta tags: hidden information within a Web page that describes the content and other qualities of that Web page. The information does not appear when the Web page is viewed, but is used by search engines to interpret further the text content of Web pages.
Offline: not connected to the Internet or other computer network.
Online: connected to the Internet or other computer network.
Secure server: a server that features encryption facilities. Documents stored and information entered on a secure server can be encrypted and protected from unwanted access.
Secure sockets layer: a standard and widely used method of data encryption.
Server: computer that is connected to the Internet and on which documents are stored. It serves or publishes these documents when requested by other computer users.
Style sheet: a standard method of defining how text and graphics should appear on one or a series of Web pages, including font size, colour and alignment.
Web: see World Wide Web
World Wide Web: a method of storing and retrieving information, including text, graphics, video and sound. Relevant documents on multiple computers are linked using hypertext, a global standard method of connecting.
FUNDRAISING
FINANCIAL MATTERS
1. REPORTING TO FUNDERS
(1) Find out what they want:
(a) Application/Budget (b) Regular reports and returns (c) Annual Project accounts (d) Parent Body accounts
(2) Does the funder understand the relationship between the individual Project and Parent Body.
2. APPLICATIONS/BUDGETS
It is essential that the application is based on fact land reality and not on last year's application plus a built-in element for contingencies.
This is not only to ensure that the figures and costings are reasonable and based on up to date information, but also to ensure a consistency in the various figures supplied to the funder. Any variances between the application and the accounts supplied ma, at best result in a query, and at worst result in a withholding of funds.
(1) Is the expenditure in the correct cost centre? (2) Is the income in the correct cost centre?
3. PROJECT ACCOUNTS/REPORTS
(1) How much detail does the funder require? (2) Are all our expenditure headings acceptable? For example, are your on-costs, (e.g. audit fee), chares to be included or re-categorised. (3) Are annual accounts sufficient or do we need to provide quarterly accounts? (4) Is the funder's financial year different to Project/Parent Body and do we have to adhere to this rather then our own (5) What is the funder's timescale for reporting? (6) Are separate salary details required, if applicable. (7) Does' the funder require the individual Project accounts to be separately audited or will they be satisfied with an extract from the audited accounts.
A separate audit certificate for a project can be arranged during our normal audit in June, but at an additional cost to the Project. However, if the auditors have to make a special visit this adds to the cost. Therefore try to persuade funders to accept an 'extract' in preference to a separate audit.
(8) Is a special audit certificate required? The remarks on timing in (7) above also apply (9) Will the funder require their own auditors to examine the project's records? (10) Do the accounts separately identify the funder's cash and is the correct amount shown?
4. RESERVES
Some funders may consider the level of a project's reserves, (or Parent Body reserves as a whole) are too high and that we have no need of further funds. You may need to explain that most funding is project specific and therefore only available for use on the project for which it was specifically given.
Accounts generally show three sorts of reserves:
(a) Restricted Funds (b) Designated Funds (c) General Funds
Only General Funds are freely available, but it must be noted that an organisation the size of some Parent’s Body’s, (albeit perhaps deemed a ‘small charity'), must have a level of reserves to ensure its survival. As a well run and prudently managed organisation a Project/parent Body should be aiming at reserves sufficient to cover three months operating expenses at least.
A further point is that reserves are not necessarily matched by cash in the bank; they are tied up in other assets such as property, debtors and office equipment.
5. VAT AND TAX ISSUES
These are dealt with in the note on VAT, Tax and Gift Aid matters.
6. CONTRACTS
Wherever possible prepare a written contract which should include the following:
(a) The cost or fee subject to VAT where applicable. (b) Payment terms (and interest?). (c) Financial reporting requirements.
7. CASH FLOW
Have you considered the cash flow implications of the funding? When will you receive the cash relative to when you have to incur the expenditure?
8. AVOID SURPRISES
If all requirements and deadlines are agreed in advance it should be relatively easy to keep everyone happy Funder, Project and even the Treasurer/Finance Director.
VAT & TAX MATTERS
These notes are intended as an aide memoir for some of the various tax and VAT problems you may encounter. This list is not comprehensive and there may be further points which need to be added. Nor is it intended to give you the answers which would take a lot of paper; it is intended to alert you to potential problems so that you can then seek further advice from a qualified person, e.g. Accountant where appropriate. This is given as a guide only and no responsibility will be taken by the publisher for any inaccuracies and consequences arising out of the information below. All matters relating to VAT should be discussed and verified with the local H M Customs & Excise VAT Office before acting, unless otherwise professionally advised. Similarly, matters relating to other Taxation should be referred to the HM Revenue & Customs – (HMRC) • Charities office at Bootle, unless again advised otherwise by a professionally qualified person or business.
[Full details are contained in the Book download in Acrobat .pdf format below].
Should you require further information regarding your VAT liability, please contact your local HM Revenue & Customs Office.
If a donor pays Income Tax, (or Capital Gains Tax), they complete a simple form, (provided by the charity), and return all the proposed giving to the charity. Every £1 you give becomes £1. 28 at no extra cost to you. It is as simple as that.
Q] A prospective donor does not pay much tax - can I still use Gift Aid? A] Yes...the donor just need to pay enough tax to cover what the charity re-claims, (e.g. if you give £2 per week, donor needs to pay £29 tax in a year).
Q] How long is a donor committed for? A] Unlike the old Covenants Scheme, a donor can cancel a Gift Aid Declaration any time by just writing and informing the charity.
Q] What if the donor wants to change the mount they give? A] Just change it! Unlike again the old Covenant Scheme, a Gift Aid Declaration covers all monies.
Q] What if the donor becomes unemployed, or moves away and has to stop giving? A] Do not worry. Once more, unlike the old Covenant Scheme, a Gift Aid Declaration does not tie the donor to a set amount. The donor can stop or reduce their giving at any time
Q] What if the donor stops paying Tax? A] The Donor just writes and lets the charity know that they want to cancel their Gift Aid Declaration.
[For more information, queries, or other question, refer to the Gift Aid Web site @
3.1.1 This Section covers the revised Gift Aid Scheme, as introduced from 6th April 2000 (1 April for companies) by Finance Act 2000. In order to place the changes in Finance Act 2000 in context, Section A gives a brief outline on the old Gift Aid and Deed of Covenant schemes. If charities need further information on these previous schemes they should telephone or write to HM Revenue & Customs – (HMRC) • Charities.
SECTION A: BACKGROUND
3.2 Gift Aid pre-April 2000
3.2.1 The original Gift Aid Scheme was introduced in 1990. It enabled United Kingdom resident individuals and companies to give single gifts of money to charity tax-effectively, but it required a minimum amount to be given. Non-close companies could give any amount.
3.2.2 The individual or company made a donation net of basic rate tax and gave the charity a certificate (R190 (SD) for individuals and R240 (SD) for companies. The individual must have had at least as much income chargeable at the basic rate as the amount of the gross donation. Companies were required to deduct basic rate tax from the donation and pay it over to the HM Revenue & Customs – (HMRC) • Charities.
3.2.3 If the individual paid tax at the higher rate he or she could get relief on the gift on the difference between the basic and higher rate on the grossed-up amount. A company deducted the grossed up amount of the donation as a charge in its corporation tax computation.
3.2.4 Charities receiving Gift Aid donations could reclaim basic rate tax on the donations, provided they were in receipt of a valid certificate from the donor and could demonstrate a clear audit trail linking the donation to the donor.
3.2.5 If the donor received benefits from the charity worth more than 2.5% of the net gift, the gift would not qualify for Gift Aid. The maximum total benefits received by the donor from any one charity in a tax year could not be worth more than £250.
3.3 Tax relief for covenanted donations to charity pre-April 2000
3.3.1 Regular payments made by individuals and companies to a charity under a Deed of Covenant were paid after deduction of basic rate tax. The charity could claim back from the HM Revenue & Customs – (HMRC) • Charities the basic rate tax deducted from the payment.
3.3.2 The individual must have paid at least as much income tax at the basic rate as the amount of tax reclaimed by the charity on the payment. If the amount reclaimed by the charity exceeded the amount paid by the covenator, the HM Revenue & Customs – (HMRC) • Charities might require the individual to pay the tax difference. Companies were required to deduct basic rate tax from the covenanted payment and pay it over separately to the HM Revenue & Customs – (HMRC) • Charities.
3.3.3 If the individual paid tax at the higher rate, he or she could get relief on the payment on the difference between the basic and higher rate on the grossed-up amount.
A company deducted the gross amount of the payment as a charge in its corporation tax computation.
3.3.4 Charities receiving covenanted payments could reclaim basic rate tax on the payments made, provided the covenant was legally valid, lasted for over three years and a clear audit trail could be demonstrated linking the payment to the donor.
3.3.5 There was no statutory limit on the benefits which could be received in relation to payments made to a charity under a Deed of Covenant. However, for payments of £100 made under a Deed to a membership charity, benefits up to 25% of the net amount of the payments were ignored for tax purposes.
SECTION B: GIFT AID FOR INDIVIDUALS FROM APRIL 2000
3.4 Introduction
3.4.1 The Gift Aid scheme was amended by Finance Act 2000 for donations made by individuals on or after 6th April 2000. The main changes were to:
abolish the £250 minimum limit for Gift Aid donations, so that the scheme applies to any donation, whether large or small, regular or one-off
withdraw the separate tax relief for payments made under a Deed of Covenant and give all relief for such payments under the Gift Aid scheme
replace the requirement for donors to give the charity a Gift Aid certificate with a requirement to give a new, simpler and more flexible Gift Aid declaration
allow donors to give a written Gift Aid declaration by post, by fax or by internet or an oral declaration over the phone or face to face.
allow
Crown servants and members of the UK armed services serving overseas, and
other non-UK-resident individuals who make donations out of income or gains charged to UK tax, to use the new Gift Aid scheme.
3.5 Commencement date
3.5.1 In the case of donations by individuals, the new Gift Aid measures apply to:
covenanted payments falling due on or after 6th April 2000, and
all other donations made on or after 6th April 2000.
3.5.2 Where a covenanted payment due before 6th April 2000 was made on or after that date:
the existing rules for Deeds of Covenant will continue to apply to the payment.
In particular, the rule entitling the charity to reclaim tax at the basic rate in force when the covenanted payment falls due, rather than when it is made, will continue to apply to the payment.
Example
Mr MacDonald made a Deed of Covenant in favour of his local church, promising to pay £5 a week by until 31st December 2000. Mr MacDonald was unable to attend church on Sunday 2nd April 2000, but paid £10 on Sunday 9th April 2000. The £5 due on 2nd April 2000 will come under the Deed of Covenant scheme, and tax can be reclaimed at the basic rate of 23% (the tax rate in force when the payment was due). The £5 due on 9th April 2000 will come within the Gift Aid scheme (as will future payments under the Deed). Tax can be reclaimed at the basic rate of 22% in relation to this amount.
3.6 Abolition of the £250 minimum limit
3.6.1 From 6 April 2000, the £250 minimum limit for Gift Aid donations was abolished. From that date the charity can reclaim tax on any donations made by individuals, whether large or small, regular or one-off - provided the other conditions for the tax relief are satisfied. In particular, the charity will still have to be able to show an audit trail (see section 3.36 below) from the donation to a donor who has given a Gift Aid declaration which covers that donation. For Gift Aid declarations, see section 3.10 below.
3.6.2 Each charity will need to decide, from its own circumstances, whether it wishes to reclaim on small Gift Aid donations. For some charities it may not be cost effective to claim on donations below a certain threshold. For a small charity that can call on plenty of volunteers, it may be cost effective to claim on all Gift Aid donations. Whether a charity makes a claim on a Gift Aid donation or not, it is still possible for the donor to claim higher rate relief on the gross amount of the donation, provided he or she has completed a Gift Aid declaration and met the other conditions of the scheme.
Example
A donor who pays higher rate tax makes a Gift Aid donation on 30 June 2000 of £3 to a charity to which he has made a declaration. The charity has a policy of not claiming on donations below a threshold of £5, because it is not cost effective to do so. It therefore does not claim back the tax of £0.85 on the donation (£3 X 22/78).
The donor, however, can include the donation of £3 amongst any other donations on her tax return. Higher rate relief of £0.70 (£3.85 X 18%) will be due.
3.7.1 Before 6 April 2000, only donations by UK-resident individuals could qualify as Gift Aid donations. From April 2000, the following will qualify:
donations by individuals who are resident in the UK
donations by individuals who are Crown servants or members of the UK armed forces serving overseas
donations by other non-resident individuals, provided they have income or capital gains charged to UK tax at least equal to the gross amount of the donation (i.e. the donation before deduction of basic rate income tax).
3.8 Methods of donation
3.8.1 Donors must donate their own money. The donation can be made by cash, cheque, direct debit, credit card, debit card, postal order or standing order. `Telegraphic transfer' is also acceptable. Donations can be made in sterling or any foreign currency. When calculating claims the charity must convert foreign currency into sterling at the rate on the date when the donation was made.
3.8.2 Donations by cheque are only valid pending clearance of the cheque. If the cheque is not honoured a donation has not been made.
3.8.3 A donation must be a payment of a sum of money. A donation cannot be made in kind, by loan waiver or by debt/loan conversion.
3.8.4 Subject to the benefits rules outlined below in Section D, outright payments to a charity in return for services, rights or goods are not gifts to charity and so are not eligible for Gift Aid tax relief. For example, the following cannot come within the Gift Aid scheme:
Payment
of school fees for a specific person
to purchase books, jumble sale items, food etc
for admission to events (jumble sales, concerts etc)
for raffle or lottery tickets (including 100 clubs etc). The payment to purchase a raffle ticket from a charity is not a gift to that charity but a payment for the right to enter the raffle. It is immaterial that the chance or expectation of winning a prize is small or that the value of the prize maybe negligible.
A charity must not make claims under the Gift Aid scheme in respect of payments which have already received tax relief. This includes payments received in the form of charity voucher or from a Payroll Giving Agency in respect of payments made under the Payroll Giving scheme.
Charities also should bear in mind that charity vouchers cannot themselves be used to purchase services, rights or goods, examples of which are shown above.
3.9 Tax to cover
3.9.1 From 6th April 2000, donors no longer need to pay income tax at the basic rate equal to the tax reclaimed by the charity on their donations. Instead, donors have to pay an amount of income tax and/or capital gains tax, whether at the basic rate or some other rate, equal to the tax deducted from their donations. This means that donors who previously may have paid tax at a marginal rate between the lower and basic rates of tax (and therefore had not paid enough tax at the basic rate to cover the tax reclaimed by the charity) will no longer have additional tax to pay.
3.9.2 Even though a donor cannot receive payment of non-payable tax credits on dividends paid by UK companies, those credits can be used by the donor to cover the tax reclaimed by the charity on the donation. Tax deducted from bank and building society interest etc., and not repaid, can also be used to cover the tax reclaimed by the charity.
3.9.3 Prior to 6th April 2000 donors could only claim higher rate tax relief for their donations against income tax they paid. From 6 April 2000 donors will be able to claim higher rate tax relief for their donations against both income tax and/or capital gains tax.
3.9.4 The position of a taxpayer making Gift Aid donations can change from one tax year to the next. Charities are recommended to remind donors on a regular basis of the need for them to have paid sufficient income and/or capital gains tax on their donations. It need not be done in a separate letter to each donor, but could be included in any material sent to supporters (a newsletter, for example).
3.10.1 From 6th April 2000, Gift Aid certificates were replaced by new, simpler and more flexible Gift Aid declarations. Before a charity can reclaim tax on a donation by an individual, it must have received a Gift Aid declaration from the donor containing certain information and confirming that the donation is to be treated as a Gift Aid donation. Without this declaration, a donation from an individual will not qualify under the scheme.
3.10.2 Donors will be able to give the charity a declaration:
in advance of their donation, at the time of their donation, or at any time after their donation (subject to the normal time limit within which tax can be reclaimed - normally around six years)
to cover a single donation or any number of donations
in writing (e.g. by post, by fax or electronically through the Internet) or orally (e.g. over the phone or face to face).
3.10.3 The amount of information required by law on a Gift Aid declaration has been kept to the minimum consistent with proper administration of the tax relief and the need for the charity to be able to show an audit trail. Charities may well wish to add further information and notes of their own on their declaration forms. It may also be necessary for the charity to add further information to satisfy other legal requirements. For example:
if the charity plans to use the information provided by the donor for any use other than reclaiming tax, the Data Protection Act 1998 requires you to explain this
if a registered charity in England and Wales incorporates the Gift Aid declaration in appeals literature, the Charities Act 1993 requires a charity to include a statement that it is a registered charity. Under Scots law, Scottish charities are required to include a statement that they are recognised charities.
3.10.4 The HM Revenue & Customs – (HMRC) • Charities has no objection to charities incorporating declarations into other documents, such as standing order mandates or Deeds of Covenant. These documents may contain more than the minimum requirements laid down in the legislation.
3.10.5 Charities will need to design their own Gift Aid declarations. There is no official form produced and available from the HM Revenue & Customs – (HMRC) • Charities (but see paragraph 3.10.6 below). Charities should ensure that the declarations satisfy all the requirements set out in the paragraphs below and any other legal requirements under the Data Protection Act, the Charities Act, etc. There is no need to get the HM Revenue & Customs – (HMRC) • Charities's approval for own-design declarations, but HM Revenue & Customs – (HMRC) • Charities will be happy to review declarations if a charity wants. If a charity or fund-raiser wants the HM Revenue & Customs – (HMRC) • Charities to comment on a declaration, they should contact:
For charities in England, Wales and Northern Ireland
3.10.6 Appendix B1 to these Guidance Notes contains an HM Revenue & Customs – (HMRC) • Charities model declaration form, which you can use or adapt if you wish. The model declaration contains some notes over and above the minimum requirement. You do not have to include all of these notes in your own-design declaration form. Those notes in bold type must be included if the declaration form is to be valid.
3.11 What a Gift Aid declaration must contain
3.11.1 All Gift Aid declarations must contain:
the donor's name
the donor's home address
the charity's name
a description of the donations to which the declaration relates
a declaration that the donations are to be treated as Gift Aid donations
and, except in the case of a declaration given orally:
a note explaining the requirement that the donor must pay an amount of income tax and/or capital gains tax equal to the tax deducted from his or her donations.
3.11.2 There is no statutory requirement for a declaration to be signed and dated.
3.11.3 A date is needed on the declaration only where it serves to identify that a particular donation or donations are to come within the scheme. For example, if the declaration stated that `all donations I make from today were to be Gift Aid donations, clearly a date would be required. A date would not be required, however, where the declaration stated, for example, `all donations I make to the charity from 6th April 2000'.
3.11.4 In the case of a written declaration, the charity may wish to pre-print most of the information on the declaration form. For example, the charity's name might be pre-printed. Charities need to bear in mind, however, that a donor might later wish to deny that he or she made a declaration. If there is no part on a written declaration completed by the donor, the charity will find it difficult to prove that the declaration was genuine.
The donor's name and home address
3.11.5 In order to ensure that the charity can establish an audit trail to the donor from a donation, the charity should get as full details of the donor's name and home address as possible. In the event that HM Revenue & Customs – (HMRC) • Charities audits the tax reclaim and the information held is insufficient to enable the auditor to trace the donor, the charity may have to get further information to show that the tax reclaim is correct. If the charity cannot get the further information, it is likely that the declaration will be considered invalid.
3.11.6 Ideally, the charity should obtain the donor's full name. At the very least it should get his or her initials and surname. And it should also get the full postal address, including, in particular, the postcode.
3.11.7 If a donor subsequently changes his or her name or address, this will not invalidate the declaration. If the charity is notified of a change in the donor's name or address, it must keep a record of the updated information. The declaration itself does not need to be amended, but a record of the change should be kept on the charity's database.
The charity's name
3.11.8 The charity's full name, usual name or acronym will suffice, provided it is adequate to identify the charity.
3.11.9 Declarations can include the name of more than one charity - for example, where a joint fund-raising event takes place. In such a situation charities need to ensure that:
the donor is aware how his or her donation is to be split between the charities listed on the declaration, and
the charities keep records to show how the donations have been divided between them. Both charities will need to be able to produce a copy of the declaration, if required.
Description of the donations to which a declaration relates
3.11.10 Any appropriate description can be used. For example:
the donation of £x I made to you on dd/mm/yy, or
the enclosed donation, or
all donations I make under the direct debit mandate below, or
all donations I make on or after the date of this declaration, or
all donations I make from this date until further notice, or
all donations I have made since 6th April 2000 and all donations I make hereafter.
3.11.11 Whether the charity chooses from one or more of the above descriptions or devises its own, it is important to get the description right. The declaration will not cover any donations received that fall outside the description used.
3.11.12 Depending on the description used, a declaration may apply indefinitely to future donations. There is no requirement for such declarations to be renewed periodically, but see paragraph 3.9.4 above about reminding donors concerning tax to cover.
3.11.13 If a donor wishes to alter the description of the donations to which a declaration relates, they should cancel the declaration and make a fresh one. Declarations do not need to be cancelled when, for example, the donor changes his or her address.
Declaration that donations are to be treated as Gift Aid donations
3.11.14 Again the charity can devise appropriate wording. For example:
Please treat my donations as Gift Aid donations, or
I want my donations to be Gift Aid donations, or
Please reclaim tax on my donations, or
I want the charity to reclaim tax on my donations, or
I want the charity to reclaim tax on my donations Yes/No (delete as appropriate), or
Tick here if you want us to reclaim tax on your donations [ ].
Note explaining the tax requirement
3.11.15 Again the charity can devise appropriate wording. For example:
You must pay an amount of income tax and/or capital gains tax equal to the tax we reclaim on your donations, or
Remember to notify us if you no longer pay an amount of income tax and/or capital gains tax equal to the tax we reclaim on your donations.
3.12 Written declarations
3.12.1 Written declarations include declarations made on paper or electronically. The former can be handed, posted or faxed to the charity by the donor, and the latter can be made online via the Internet.
3.13 Oral declarations
3.13.1 In the case of an oral declaration, the person taking the declaration on behalf of the charity might recite information already held by the charity to the donor and ask him or her to confirm it, rather than asking the donor to recite the information him/herself.
3.13.2 If a charity receives an oral declaration it must send the donor a written record of the declaration showing:
all the details provided by the donor in his or her oral declaration
a note explaining the requirement that the donor must pay an amount of income tax and/or capital gains tax equal to the tax deducted from his or her donations
a note explaining the donor's entitlement to cancel the declaration retrospectively within 30 days (see paragraph 3.14.3 below)
the date on which the donor gave the charity the declaration, and
the date on which the charity sent the written record to the donor.
3.13.3 An oral declaration will not be effective unless and until the charity or its representative sends the donor the written record of the declaration. The charity cannot reclaim tax in respect of a donation covered by an oral declaration until it has sent the written record. Once the written record has been sent, the charity can reclaim tax in respect of any donations covered by the declaration, even if they were received before the written record was sent. If the oral declaration is cancelled within the 30-day period, however, any reclaimed tax will have to be repaid to the HM Revenue & Customs – (HMRC) • Charities (see paragraph 3.14.3 below).
3.13.4 The written record of the declaration does not have to be recorded on paper. For example, the charity's representative might record the details on a computer, with an electronic copy being e-mailed to the donor, or a hard copy sent by post. If the charity uses an electronic means of recording the donor's information, it will need to demonstrate to HM Revenue & Customs – (HMRC) • Charities at an audit that the electronic recording of the information generates a written record sent to the donor.
3.14 Cancellation of written and oral declarations
3.14.1 Donors are entitled to cancel their declaration at any time. They may do so by notifying the charity in any form of communication. The charity should keep a record of the cancellation of a declaration, including the date of the donor's notification.
3.14.2 Subject to paragraph 3.14.3 below, cancellation of a declaration has effect only in relation to donations received by the charity on or after:
the date on which the donor notifies the charity of the cancellation, or
such later date as the donor may specify in the cancellation.
The charity must not reclaim tax in respect of such donations. However, any donations received before the date of the donor's notification will still qualify as Gift Aid donations.
3.14.3 If a donor who has given the charity an oral declaration cancels it within the period of 30 days after being sent the written record, the cancellation will have retrospective effect, so that it will be as if the declaration had never been made.
3.15 Particular types of declaration
Joint declarations by spouses etc.
3.15.1 It is possible for spouses and persons living together to make a joint declaration on the same form. The joint declaration must include the full names and address of both. Both parties will need to make clear to the charity from whom each donation originates, or how a joint donation is to be split for purposes of the charity's records. Likewise, the donors will need to record similar details for purposes of their own tax affairs. The charity will need to list each person and their part of the donation separately on the R68 (Gift Aid) schedule form accompanying the claim.
Partnership declarations
3.15.2 In England, Wales and Northern Ireland a business partnership does not have legal personality. So, a donation by a partnership is treated as made by the underlying partners. One partner may make a Gift Aid declaration on behalf of all the partners, provided he or she has the power to do so under the terms of the partnership agreement or some other instrument given under seal. In that case it will be sufficient for the declaration to show the name and address of the partnership. Otherwise, it will be necessary for each partner to make their own Gift Aid declaration. They may do so on the same declaration form, provided it lists all their names and addresses.
3.15.3 In Scotland, a partnership has legal personality. So, in all cases, one of the partners may make a Gift Aid declaration on behalf of the partnership, showing the name and address of the partnership.
3.15.4 The partners should enter their share of the donation on their own Self-Assessment return. How the donation is apportioned between the partners is a matter for them to decide, but, unless there is evidence to the contrary, it will be assumed to be in accordance with their share of the partnership profits.
Declarations linked to sponsored events
3.15.5 The money raised from a sponsored event does not belong to the individual who has been sponsored and is not his or hers to give as a Gift Aid payment. However, it is possible for the individual amount raised from each sponsor to count as a Gift Aid donation from that sponsor.
3.15.6 The person being sponsored may ask the sponsors to make a separate declaration to the charity for which he or she is raising the money - this is likely to be on a one-off donation type of declaration supplied to the participant by the charity. 3.15.7 Alternatively, it is possible for charities to design a sponsorship form that can also be used as a joint declaration form. The suggested format is for the declaration to be placed at the head of each sheet, with each sponsor being able to opt to have his or her sponsorship money paid to the charity as a Gift Aid donation by, for example, ticking a box. The recommended method is to have the following boxes below the declaration for each sponsor to complete:
Sponsor's full name
Home address, including post code
Amount pledged
Amount collected
Date collected
Tick box to have amount treated as a Gift Aid donation.
The date when the sums collected were handed over to the charity should also be entered on the form. A copy of a model Gift Aid sponsored event form can be found at Appendix B2.
3.15.8 The details outlined in the first three bullets above would be collected from the sponsors by the participant prior to the event, with the other details being entered on the form when the money is collected.
3.15.9 The participant will need to ensure, if the money collected is banked in his/her own account before a cheque is sent to the charity, that the sum on the cheque matches the amount collected on the sponsorship forms so that the charity is provided with a clear audit trail.
3.15.10 The charity can use a declaration/sponsorship form that has been approved by HM Revenue & Customs – (HMRC) • Charities as a substitute for the R68 (New Gift Aid) schedule that accompanies the claim (on which, see Section 6.4). The original should be retained by the charity and a copy sent with the repayment claim. It is recommended that claims made for this type of donation be made on a separate R68 tax claim form from those relating to other types of donors. You should provide a summary of the items eligible for Gift Aid and calculate the tax claimed on that total. Alternatively, for large events, charities can use the modified procedure set out in paragraphs 6.6.9 - 6.6.14 of this guidance.
3.15.11 HM Revenue & Customs – (HMRC) • Charities is happy to advise charities on how to operate Gift Aid for sponsorship events, and to review draft sponsorship/declaration forms.
3.16 Deeds of Covenant - transitional arrangements
3.16.1 From 6th April 2000 there is no longer a separate tax relief for payments made by an individual (or a company) under a Deed of Covenant - in future all tax relief for such payments is under the Gift Aid scheme. As a transitional measure, charities do not have to get a Gift Aid declaration in respect of payments under a Deed of Covenant that is already in existence before 6th April 2000. The Deed of Covenant will stand in place of the Gift Aid declaration. However, any donations made outside the terms of the Deed, or after expiry of the Deed, must be covered by a separate Gift Aid declaration.
3.16.2 Payments made under a Deed of Covenant executed on or after 6th April 2000 must be covered by a Gift Aid declaration. Where a charity wishes to continue with the use of Deeds of Covenants for donors, these can also be used as declarations provided all the information required in the declaration is given on the Deed.
3.16.3 The abolition of a separate tax relief for payments made under a Deed of Covenant to a charity does not mean, of course, that such deeds will cease to exist. It does mean that they are no longer required so that a charity can reclaim tax on the donations. Some charities may decide to continue to obtain Deeds of Covenant from their supporters in order to secure a regular flow of income. If they do so, they will need to make sure they also obtain a Gift Aid declaration from the donor, or ensure the Deed contains the necessary elements required in such a declaration.
Example
Mrs Jones has a Deed of Covenant in force with her local church to pay £2 weekly. The Deed commenced on 1st January 2000, and will cease on 31st December 2003. On 1 September 2000 she increased her weekly donations to £3 per week.
Mrs Jones will need to make a Gift Aid declaration in relation to the additional £1 a week she is giving, if she wants the amount to come within the scheme. Even if she does not, she will need to make a declaration after December 2003 if her original donations of £2 are to continue to be tax effective.
Alternatively, if Mrs Jones is willing, the church may decide to cancel the covenant with effect from 6th April 2000 and replace it with an open Gift Aid declaration in relation to all donations made by her on or after 6th April 2000.
Mrs Jones can make a Gift Aid declaration from 6th April 2000, even if the covenant remains in force, to cover the deed payments and any other donations she may make to the church.
3.16.4 From 6th April 2000 HM Revenue & Customs – (HMRC) • Charities will no longer give advice on the drafting of Deeds of Covenant for individuals (or companies).
Deposit covenants
3.16.5 A loan or deposit covenant is an arrangement under which the covenantor pays to the charity a lump sum equal to all the payments which will fall due over the life of a Deed of Covenant. The lump sum is treated as a loan or a deposit and the payments under the Deed are treated as being paid from this fund as they fall due.
3.16.6 For Gift Aid purposes, however, payment will be deemed to have been made when the lump sum is made over to the charity, and tax relief for the charity and donor will be for the year in which this occurs. Charities will need to ensure, if they continue to seek deposit covenants, that any loans or deposits they receive from a supporter who has an open Gift Aid declaration in place are supported by a deed making over the amount to the charity over a period of time. Loans or deposits that are returnable should not feature in a Gift Aid claim.
3.16.7 As a transitional concession, however, payments due under a loan or deposit covenant on or after 6th April 2000 which were prepaid before 6th April 2000 will be treated as new Gift Aid donations paid on the due date. The amount due under the deed will be treated as paid on the date it is converted from a loan or deposit to a payment. This will ensure that tax relief will not be lost, as would otherwise be the case, on loan or deposit covenants taken out prior to 6th April 2000.
3.16.8 Additionally, in the case of deposit covenants in existence at 5th April 2000, the outstanding loan can be converted into a Gift Aid payment, providing there is evidence that the charity are content to release the donor from the covenant and the donor wishes the deposit to be treated as a donation.
SECTION C: GIFT AID FOR COMPANIES FROM APRIL 2000
3.17 Introduction
3.17.1 From 1st April 2000 Gift Aid donations made by companies to charities must be paid without deduction of income tax. No declarations are required. There are also special rules for companies owned by charities, allowing them to set off the donation in an earlier accounting period than the one in which the donation was made.
3.18 Commencement date
3.18.1 In the case of donations by companies, the new Gift Aid measures will apply to all donations - including covenanted payments - made on or after 1st April 2000, (even if paid under a Deed of Covenant executed before that date).
Example
A Deed of Covenant executed on 1st April 1999 provides for a company to make covenanted payments of such an amount as after deduction of tax equals £1,000. While the basic rate is 22 per cent, the company is required to make gross payments of £1,282 (£1,282 less tax at 22 per cent = £1,000). From 1st April 2000, the company will simply pay the gross amount (£1282) and claim tax relief for this amount when calculating its profits for corporation tax.
3.19 Abolition of the £250 minimum limit
3.19.1 From 1st April 2000, the £250 minimum limit for Gift Aid donations by close companies was abolished.
3.20 Non-resident companies
3.20.1 From 1st April 2000, non-resident companies within the UK corporation tax regime can make Gift Aid donations. However, non-resident companies within the UK income tax regime cannot make Gift Aid donations.
3.21 Deduction of tax
3.21.1 From 1st April 2000 companies, including companies owned by a charity and unincorporated associations, such as clubs and societies, must no longer deduct tax from their Gift Aid donations.
3.21.2 The charity cannot reclaim tax on donations it receives from a company on or after 1st April 2000. There is no space on the claim form R68 (2000) for a claim to tax repayment on company donations. If a company incorrectly deducts tax from its donation, the company should be told about the new rule and asked to pay to the charity the sum it has incorrectly deducted. The change to gross giving for companies is noted on the CT61 (Z) returns issued quarterly to companies.
3.22 Declarations
3.22.1 From 1st April 2000 the company making the Gift Aid donation no longer completes a certificate (R240 (SD)) or makes a declaration.
3.23 Records
3.23.1 As far as the charity is concerned, it need do no more than keep the necessary accounting records normally required to record donations. The company should retain any correspondence with the charity in relation to the donation (a `thank you' letter, for example), as evidence of making the donation.
3.24 Carry-back to a previous accounting period
Introduction
3.24.1 Charities often set up wholly owned companies to carry out activities that might result in an income tax or corporation tax liability if carried out by the charities themselves. This is because some activities fall outside the tax exemptions afforded to charities in the Taxes Acts. These companies often enter into a profit-shedding Deed of Covenant with the parent charity, or Gift Aid arrangements, under which they pay to the charity a sum equivalent to the profits assessable to corporation tax. Some deeds may provide for a percentage of the taxable profit to be paid, or even a fixed amount.
3.24.2 Under normal corporation tax rules, companies can only claim a deduction for a charge (such as a Gift Aid donation) in their tax computations in the accounting period in which the charge was paid. If a company wished to pay over to charity an amount equal to its corporation tax profit, it would be obliged to determine that profit by the end of the accounting period. This would be difficult to do because the accounts of the company would not have been drawn up at that stage.
3.24.3 Under the provisions introduced by Finance Act 2000, payments made by a company under a profit-shedding deed to a charity will fall within the Gift Aid Scheme if made on or after 1st April 2000. They are paid without deduction of tax and without the need for a declaration, as detailed above in sections 3.21 and 3.22.
3.24.5 Unlike other types of companies, charity-owned companies have nine months from the end of the accounting period in which to determine the amount they wish to give or are obliged to pay to the charity under a profit-shedding deed. They can then claim the deduction against the corporation tax profits of the accounting period to which the payment relates.
Commencement
3.24.6 The new Gift Aid provisions in relation to charity-owned companies come into force for donations made on or after 1st April 2000, even if the donation relates to an accounting period which ended on or before 31st March 2000.
Example
The shares in Charity A Enterprises Ltd are all owned by Charity A. The company's accounting periods end on the 31st December. In the year ended 31st December 1999 it made a corporation tax profit. Provided it made a Gift Aid donation to its parent charity on or after 1st April 2000, but not after 30th September 2000, the donation could be deducted as a charge in the company's corporation tax computations for the accounting period ended 31st December 1999.
Estimated donations
3.24.7 With the removal of the requirement for companies to deduct tax from Gift Aid donations, HM Revenue & Customs – (HMRC) • Charities no longer repay any tax or require over-repayments from charities to be adjusted. For Gift Aid purposes, HM Revenue & Customs – (HMRC) • Charities will simply expect to see an amount deducted in the charity-owned company's accounts and a matching entry in the charity's accounts. Where a charity-owned company makes a donation to its parent charity, to extinguish any corporation tax liability, and this proves to be excessive and is partly repaid by the charity, HM Revenue & Customs – (HMRC) • Charities will expect to see some sort of evidence that the intention was to pay over the annual profits (correspondence, Board minutes or profit-shedding deed), and that any money paid over was clearly provisional or loaned until the profits were finalised. If there were a need for the charity to repay some of the money, again HM Revenue & Customs – (HMRC) • Charities would look for evidence of the purpose of the payment by the charity to the company. In cases where the charity-owned company makes Gift Aid donations less than the full amount of the corporation tax profit within the nine-month period, no further relief can be given in the company's earlier accounting period for any remaining profit subsequently paid over in Gift Aid donations to the charity.
Charity-owned companies
3.24.8 The nine-month carry-back facility only applies to companies that are wholly owned by a charity. In the case of a company limited by share capital, this means that all the ordinary share capital must be owned by one or more charities. The share capital can be owned directly or indirectly (through an intermediate company, for example).
3.24.9 However, charity-owned companies are not confined to ones limited by share capital. Some companies controlled by charities are limited by guarantee. This type of company is also included in the nine-month carry-back provisions if every person who is beneficially entitled to
participate in the company's profits, or
share in the net assets at a winding- up
is a charity or a company wholly owned by a charity. The Memorandum and Articles of a company limited by guarantee will normally indicate if the company meets the conditions outlined above.
SECTION D: BENEFITS RECEIVED BY DONORS
3.25 Introduction
3.25.1 Charities may wish to give a token of appreciation by way of a thank you to their donors for their donations. Modest benefits received in consequence of making a donation will not stop the donation from qualifying as a Gift Aid donation, provided their value does not exceed certain limits. If a charity wishes to provide benefits to its donors - for example, as part of a membership scheme - it should consider whether the benefits it intends to provide fall within the limits in the donor benefit rules given below. If the benefits exceed the limits, then the donation cannot qualify under the Gift Aid Scheme. 3.25.2 In order to decide whether a donation can qualify under the Gift Aid Scheme, the charity needs to determine:
whether the donor, or a person connected with the donor, receives any benefits in consequence of making the donation, other than of the type detailed in Section 3.27 below, which can be ignored.
if benefits are received, whether their value exceeds the limits in the donor benefit rules.
3.25.3 A person is connected with the donor if that person is
the wife or husband
a relative (brother, sister, ancestor (e.g. mother) or lineal descendant (e.g. grandson)
the wife or husband of a relative
a company under the control of the donor, or under control of connected persons.
3.26 What is a benefit?
3.26.1 A benefit is:
any item or service
provided by the charity or a third party
to the donor or a person connected with the donor
in consequence of making of the donation.
3.26.2 If goods or services are provided for the donor by an unconnected third party entirely unsolicited by either the charity or the donor, such goods or services will not be considered to be benefits for the purposes of these rules.
3.27 What is not a benefit?
Acknowledgements
3.27.1 A mere acknowledgement of a donor's generosity in a charity's literature (e.g. a theatre programme) or on a plaque etc will not amount to a benefit, provided the acknowledgement does not take the form of an advertisement for the donor's business (as might be evidenced by the size and prominence given to the acknowledgement). The wording should be confined to thanks for the support the donor has given, together with the donor's name, and/or their logo.
Right of admission to view heritage property or wildlife
3.27.2 A free or reduced-price right of admission to property is disregarded if:
it is to view property, the preservation of which is the charity's sole or main aim, or
it is to view wildlife, the conservation of which is the charity's sole or main aim, and
it is restricted to the donor and members of his or her family, and
it is available to any member of the public who makes a similar donation.
3.27.3 This relaxation of the donor benefit rules does not apply if the benefit extends beyond a right of admission to view property or wildlife (e.g. a right of admission to a heritage property to attend a concert). Depending on the objects of the charity, however, the relaxation may extend to the viewing of property or wildlife that is not directly under the control of the charity (to view a heritage property belonging to another similar charity by a reciprocal agreement, for example).
3.27.4 The relaxation does not apply if the benefit extends beyond the donor and members of his or her family.
3.27.5 The HM Revenue & Customs – (HMRC) • Charities recognises, however, that, in practice, charities:
will often want to lay down rules for the maximum number of people that a donor may bring into the charity's premises, and
cannot be expected to check the identity and family relationship of people who seek admission to their premises.
The HM Revenue & Customs – (HMRC) • Charities will therefore accept that rules that are intended to restrict the right of admission to family groups - such as a right of admission for the donor and up to two other adults and six children -satisfies the members of the family test.
3.28 The donor benefit rules
3.28.1 The donor benefit rules contain two limits for the value of the benefits that a donor, or a person connected with the donor, may receive in consequence of making a donation. If the value of the benefits received exceeds either of these limits, the donation will not qualify as a Gift Aid donation. A donation will not qualify if:
the value of the benefits exceeds the limits in the table at paragraph 3.29.1 (the relevant value test), or
the value of the benefits plus the value of any benefits received in consequence of any Gift Aid donations made by the same donor to the same charity earlier in the same tax year exceeds £250 (the aggregate value test).
3.29 The relevant value test
3.29.1 The limits for the relevant value test are:
Amount of donation Value of benefits £0-100 25% of the donation £101-1,000 £25 £1001+ 2.5% of the donation
These limits apply separately to each donation.
3.29.2 Special rules apply to annualise the amount of certain donations and the value of certain benefits for the purposes of applying the limits. Broadly, in the case of subscriptions under a membership scheme, the limits normally apply by reference to the amount of the annual membership subscription and the value of the annual membership benefits. This way:
a charity can tell whether the benefits in its membership scheme will exceed the limit simply by looking at the annual membership subscription and the annual membership benefits
the result will be the same whether the donor pays the subscription in a single payment, or half-yearly, or quarterly, or monthly.
When these principles are borne in mind, the calculations for the relevant value test can be seen in context.
3.29.3 Annualising applies where a benefit:
consists of the right to receive benefits at intervals over a period of less than twelve months, or
relates to a period of less than twelve months, or
is one of a series of benefits received periodically in consequence of making a series of donations at intervals of less than twelve months, or
is a one-off benefit received in consequence of making a donation that is one of a series of donations made at intervals of less than twelve months.
3.29.4 In each of the first three categories, the amount of the donation and the value of the benefit are annualised, so that the limits in the table at paragraph 3.29.1 apply by reference to the annual amount and the annual value respectively. In the final category, the amount of the donation, but not the value of the benefit, is annualised, so that the limits in the table at paragraph 3.29.1 apply by reference to the annual amount of the donation and the actual value of the benefit.
3.29.5 Annualising is done by:
multiplying the amount of the donation or the value of the benefit by 365, and
dividing the result by
the number of days in the period of less than 12 months, or
the average number of days in the intervals of less than 12 months.
In practice, where the period or the intervals are measured in calendar months, annualising can be done by reference to calendar months, rather than days.
[3.29.6 The following examples illustrate how the relevant value test works can be found in the download Book in Acrobat .pdf format].
3.30 The aggregate value test
3.30.1 In addition to satisfying the relevant value test, the value of the benefits received in consequence of a donation must also satisfy the aggregate value test if the donation is to qualify as a Gift Aid donation. In other words:
the value of the benefits received in consequence of making the donation
plus the value of any benefits received in consequence of any Gift Aid donations by the same donor to the same charity earlier in the same tax year
must not exceed £250.
The value of benefits is not annualised for the purposes of the aggregate value test. It is the actual value, as opposed to an annual value, of the benefits that counts.
3.30.2 For example, suppose in example 1 in paragraph 3.29.6 above Ms Smith makes two further donations to the charity in the tax year 2000-2001 as follows:
Date Amount Benefits 11 March 2001 £9,600 weekend break worth £225 4 April 2001 £4,000 dinner for two worth £90
As the value of the weekend break does not exceed the limit of £240 (i.e. 2.5% of the £9,600 donation) the fifth donation passes the relevant value test. Furthermore, it passes the aggregate value test (it is not aggregated with the benefit worth £30 received in consequence of the fourth donation, because that donation did not qualify as a Gift Aid donation).
As the value of the dinner for two does not exceed the limit of £100 (i.e. 2.5% of the £4,000 donation) the sixth donation passes the relevant value test. However, it fails the aggregate value test, because the value of the dinner for two plus the value of the weekend break exceeds £250. Therefore, the sixth donation cannot qualify as a Gift Aid donation. The other five donations are unaffected.
3.31 Valuing donor benefits
3.31.1 The valuation of donor benefits can be difficult. The starting point should be to look at the value of the benefits made available. Where the item or service, or a comparable item or service, is sold to the public (whether by the charity or someone else) on arm's length terms (for example, a ticket to attend a performance by a charitable opera society), the value of the benefit will generally be the sale price to the public. Where the value of the benefit is less immediately obvious, the charity will need to determine how much someone dealing with it at arm's length would be prepared to pay for the benefit. Evidence might be obtained from similar transactions in the commercial sector.
3.31.2 The value to be arrived at is the value to the recipient. Consideration in the form of a third party discount or benefit may cost the charity nothing to provide but will still be of value to the recipient.
3.31.3 Where a benefit takes the form of attendance at an event that is not open to the public (so that there is no ticket price) the benefit should be valued by reference to the cost to the charity of staging the event and the number of people in attendance.
3.31.4 Where a benefit is given in return for a life membership subscription the value of all benefits that will be received over the lifetime of the membership must be estimated when valuing the benefit. For practical purposes the benefits received over the first 10 years of membership will be taken as the benefits received over the life of the member when deciding whether the benefit limits have been breached.
3.31.5 Where the benefit takes the form of, for example, a discount on purchases from a museum shop, the valuation needs to take account of factors such as the take-up of the discount by the average donor.
3.32 Provision of literature
3.32.1 Where a charity sends literature to its donors, the HM Revenue & Customs – (HMRC) • Charities will accept that the value is nil provided the material is produced for the purpose of describing the work of the charity. The material must be relevant to and distributed in furtherance of the objects of the charity. The fact that the literature has a cover price and is also is on sale to members of the public is not relevant. This means that literature like newsletters, bulletins, annual reports, journals, members' handbooks and programmes of events will generally carry no value for the purposes of the donor benefit rules.
3.33 Charity auctions
3.33.1 When an item is purchased at auction, the sale price can normally be taken as the value of the item. However, the HM Revenue & Customs – (HMRC) • Charities recognises that when a person purchases a lot at a charity auction they may intentionally pay more than it is worth in order to support the charity. If it can be shown that the market value of a lot purchased at a charity auction is less than the sale price paid for the lot, the lower figure can be taken as the value of the lot. This will only apply where an item has a clear and recognisable value. Where the value of an item has been enhanced, for example because it has been owned by a celebrity, the market value will not be the original price of the item but the amount it fetches in the auction.
Example 1
A travel agent gives a weekend break that normally retails for £225 as a lot for a charity auction. Ms Smith purchases the weekend break with a bid of £9,600. As the value of the weekend break does not exceed the limit of £240 (i.e. 2.5% of £9,600) the payment of £9,600 passes the relevant value test and so can qualify as a Gift Aid donation.
Example 2
A famous pop music star gives a pair of her shoes for a charity auction. These shoes normally retail for £150. Mr Webster purchases the shoes with a bid of £10,000. Although the shoes retail for £150, because a celebrity has owned them, their value has been considerably enhanced. The market value for these shoes will be £10,000, and the Gift Aid Scheme cannot be used.
3.33.2 Even if a purchase at a charity auction fails the relevant value test, it might still be possible to pay by means of a split purchase (on which, see section 3.34 below).
3.34 Split payments
3.34.1 Where the value of benefits would exceed the limits in the donor benefit rules, the donor may specify that part of his or her payment is to be treated as payment for the benefits and part is to be treated as a donation. This treatment can only apply where the item has a readily ascertainable value and the excess has a clear donative purpose. Provided the donor specifies this before, or at the time of making the donation, the part of the payment that is specified as a donation may qualify as a Gift Aid donation, provided it satisfies all the conditions for the tax relief. The charity and donor should keep evidence of how the payment was to be split - a copy of a dated letter accompanying the payment, for example. Alternatively, separate payments could be made.
3.35 Donations to support missionaries and other full-time workers for a charitable cause
3.35.1 Gift Aid only applies to unfettered gifts to a charity for its charitable purposes. Donors earmarking money for the support of relatives are, in principle, no different from those generally making payments to support other relatives, for whatever reason. These are not tax relieved. Once a Gift Aid payment has been received it is for the charity to show that its income has been applied for charitable purposes only. Gifts given on condition, rather than hope or expectation, that they will be used to feed and clothe a relative are likely to breach the benefits rules for Gift Aid.
3.35.2 The HM Revenue & Customs – (HMRC) • Charities takes the view that donations to cover the costs incurred by a charity such as a missionary society in supporting the relative of the donor, as a missionary, can qualify under the Gift Aid scheme provided the missionary society is not merely channelling a donation to the donor's relative. Where, for example, a missionary society says to its workers It costs us £10,000 a year to support you while you carry out your charitable work. We look to you to raise at least this amount of funds for the society through donations from family, etc the donations may qualify under the Gift Aid scheme. Where, on the other hand, a missionary society says to its missionaries It is up to you to support yourself while you carry out your charitable work, with the help of your family, etc. If your family wish to send you money they can do so via the Society payments will not qualify under the Gift Aid scheme.
3.35.3 This situation equally applies where a church, for example, supports the charitable work of a Christian worker. The Christian worker is unlikely to be in the employment of the Church and so the onus in demonstrating that payments made to particular individuals are unfettered and only applied for charitable purposes falls to the trustees of the church.
SECTION E: KEEPING GIFT AID RECORDS
3.36 Introduction
3.36.1 In order to operate the Gift Aid scheme, charities need to keep records to show how much has been received from each donor who has made a declaration. Charities must keep sufficient records to show that their tax reclaims are accurate. In other words, they must keep records that enable them to show:
an audit trail linking each donation to an identifiable donor who has given a valid Gift Aid declaration, and
that all the other conditions for the tax relief are satisfied (provision of benefits, for example).
3.36.2 If a charity does not keep adequate records it may be required to pay back to the HM Revenue & Customs – (HMRC) • Charities tax reclaimed, with interest. It may also be liable to a penalty under the Self-Assessment rules.
3.37 Records to be maintained
3.37.1 The form of records to be kept is not prescribed in the legislation and has not changed significantly as a result of the revised Gift Aid measures. In practice, it will depend on the size of the charity, the number of donors and the kind of systems used.
3.37.2 In the event that HM Revenue & Customs – (HMRC) • Charities audits the tax reclaim, the auditor will usually ask to see, as appropriate, in respect of a donation:
any written Gift Aid declaration
in the case of an oral Gift Aid declaration, a copy of the written record sent to the donor
any correspondence to or from the donor which relates to the donation, including
any notification of a change of name or change of address
any notification of the cancellation of the Gift Aid declaration
the charity's bank statements
the charity's bank paying-in book stubs showing details of cheques and cash banked
statements received from credit card companies showing details of credit card donations
the charity's cashbook recording the receipt of cash donations
if the charity uses envelopes to collect cash donations, a sample of the envelopes and a record of the sums enclosed
any other records the charity keeps relating to the donation.
3.38 Means of keeping records
3.38.1 The charity does not have to keep records on paper. They may be held on the hard drive of a computer, floppy disc or CD-ROM, or stored on microfiche. If records are kept on computer, it is advisable to make regular back-ups and store these in a different location to the computer. Further details on the procedures to follow when transferring original records onto microfiche or an electronic medium can be found in section 7.4 in Chapter 7.
3.40.1 Charities may choose to collect cash donations in envelopes, such as church stewardship envelopes, so that they can show an audit trail linking the donation to the donor. For one-off donations, charities may choose to pre-print the Gift Aid declaration on the envelope for completion by the donor. If the donor is a regular supporter, the charity may already hold his or her Gift Aid declaration, in which case the envelope need simply contain either:
the donor's name, or
some other unique identifier, such as a reference number which can be cross-referenced to a donor register.
3.40.2 Where a unique identifier is used, such as a reference number, ideally this should be unique to the donor. In practice, where envelopes containing the same unique identifier are used by the donor and his or her spouse and minor children, it can assumed that all the donations are from the donor, unless there is evidence to the contrary.
3.40.3 When the envelope is opened and the contents are counted, an official of the charity should record the sum that it contained both:
on the envelope, and
in a donor record.
3.40.4 Charities should retain for the period set out in section 7.3 in Chapter 7:
all envelopes on which a Gift Aid declaration is printed
a sample of other envelopes (normally for one month of the year)
the donor record.
3.41 Joint donations
3.41.1 If a charity receives a donation drawn on a joint bank account, and it has not been given a Gift Aid declaration by all of the account-holders, it will need to determine whether the donation is from a donor who has given a Gift Aid declaration. It can normally be assumed that the donation is from the account-holder who signs the cheque, debit card slip or direct debit mandate or standing order mandate. In the case of a donation received over the phone or through the Internet, it can normally be assumed that the donation is from the account-holder who authorises the transaction.
3.41.2 Similarly, if a credit card donation is received drawn on an account in respect of which there is more than one authorised signatory, it can normally be assumed that the donation is from the authorised signatory who signs the credit card slip. In the case of a donation received over the phone or through the Internet, it can normally be assumed that the donation is from the person who authorises the transaction.
3.41.3 If there is any doubt whether the donation is from the person who signs the cheque, etc. or authorises the transaction, the charity should ask them to confirm whether the donation is from them.
SECTION F: PARTICULAR SITUATIONS
3.42 Introduction
HM Revenue & Customs – (HMRC) • Charities are occasionally approached on Gift Aid issues where possibly a number of charities might be affected by the decision we arrive at. The purpose of this section is to alert charities to the HM Revenue & Customs – (HMRC) • Charities view of particular situations involving the use or proposed use of the Gift Aid scheme.
3.43 Educational school trips
3.43.1 HM Revenue & Customs – (HMRC) • Charities received approaches from schools and PTA's enquiring if Gift Aid could be used in respect of voluntary contributions toward educational school trips.
3.43.2 The following text has been passed to the Department of Education and is to be included in advice issued by the department to schools.
In schools, other than independent schools, the education provided wholly or mainly during school hours is free. This means that head teachers may not impose a charge on parents for any visit that is undertaken as part of the National Curriculum and occurs during school hours. The head teacher may, however, ask for a voluntary contribution.
Parents must be made aware that the contribution is not compulsory, and the children of parents who do not contribute may not be discriminated against. It is permissible for the school to ask parents to contribute more than the minimum amount in order to subsidise those pupils whose parents have not contributed. However, if there are not enough voluntary contributions and the shortfall cannot be made up, the visit may have to be cancelled.
Gift Aid
Voluntary parental contributions to charitable schools or charities associated with LEA schools to assist schools to send pupils on educational school trips in school time may be eligible for tax relief under the Gift Aid scheme, provided the usual requirements of the scheme are satisfied and in particular:
Parental contributions are made on the basis that they are not refundable (and are not in any event refunded) if the trip does not go ahead or if their child does not go on the trip
Any benefit arising from the school trip does not exceed the maximum level of permissible benefit for the donation.
For a donation of £0 - £100 the value of the benefits must not exceed 25% of the donation. For a donation of £101 - £1,000 the value of the benefits must not exceed £25.
Benefits include travel costs, trip insurance, cost of entry and associated educational material, cost of food and drink supplied and any other costs associated with the trip (costs averaged per pupil if appropriate).
In general, however, it is likely that the benefits associated with a school trip contribution will exceed the maximum level of permissible benefits and so the donation will not come within the Gift Aid scheme.
Example 1
The cost of an educational trip to a local museum amounts to £8 (transport £5 entry £2 and brochure £1). The school asks for a voluntary contribution of £10. The payment of £10 cannot be made under the Gift aid scheme as the benefit of £8 exceeds the 25% limit (80%).
However, provided the requested contribution is not less than the benefits, any payment in excess of the requested contribution can be Gift Aided.
Example 2
The position is the same as in example 1 but a parent makes a voluntary contribution of £15 instead of the requested £10. The additional £5 can be made as a Gift Aid payment.
· `Charities and charitable giving' (on left hand side of page); then
· `Guidance notes for charities'.
3.44 Church collections
3.44.1 We are frequently asked if collections made for particular charities by churches can fall within the churches Gift Aid scheme. This will depend on the particular circumstances.
3.44.2 If the church has not exercised any discretion in collecting the donations and the donations are merely given to the church to pass on to a particular charity then:
the church has no entitlement to the donations (and they do not form part of the church's income);
the church is merely acting as a conduit and it is the charity that is the donee; and
the charity must claim any Gift Aid tax relief (subject to the normal requirements, Gift Aid declaration and audit trail).
3.44.3 However, if the church exercises its discretion and decides to open a fund for donations to a particular charity, then:
the fund is a designated fund of the church;
the church is the donee and the donations form part of the church's income; and
the church is able to claim and Gift Aid tax relief (subject to the normal requirements).
3.44.4 We are also frequently asked if the tax reclaimed as well as the net Gift Aid donation should be passed to the charity by the church. It is our view that a church would be legally obliged to pass the tax associated with a Gift Aid payment to the charity. The donor would have made his donation in expectation that both the Gift Aid donation and the associated Gift Aid tax would go to the charity for which the collection was made.
3.45 Educational Trusts
3.45.1 The HM Revenue & Customs – (HMRC) • Charities has been approached by a number of educational trusts for clarification of position of parents and persons connected to them making Gift Aid payments to such trusts.
3.45.2 Invariably the Trust is established to provide education for children as an alternative to State education. Whilst parents may pay for text books, exercise books, exam fees and consumable materials, they are not required to pay any fees to cover the costs of tuition and other overheads.
3.45.3 The HM Revenue & Customs – (HMRC) • Charities view of payments made by parents and persons connected to them, to such trusts, under the Gift Aid scheme is that the benefit the donor or someone connected to them receives will generally be in excess of the benefit limits.
3.45.4 The HM Revenue & Customs – (HMRC) • Charities view is based on the fact that there is a cost in providing education for the child and this cost is met in consequence of the Gift Aid payments being made. This includes the cost of tuition, heating and lighting of premises and other administrative costs, which would be taken into account by a private school in setting fees.
3.45.5 In situations where the trust has a genuine fee structure in place i.e. fees are charged in respect of all students and the fees are set at such a level that enables the trust to operate without needing additional support, the HM Revenue & Customs – (HMRC) • Charities would accept that the benefit of receiving education arises from payment of the fees. Consequently, the receipt of education would not be received as a consequence of making donations over and above the fees and so those donations could qualify for Gift Aid.
3.45.6 Where there is no fee structure or only nominal fees are charged, insufficient to enable the trust to operate without additional donations we do not accept that the additional donations give rise to no benefit. In considering whether the level of fees was sufficient to cover operating costs we accept that trusts should be allowed to take account of reliable, ongoing income sources such as endowments, but not one-off or periodic donations where no binding commitment exists.
Claiming Tax Back
How charities get started with Gift Aid
Who can claim?
How do we claim?
Further information
Who can claim?
To claim repayment of tax under the Gift Aid scheme you must be a charity. In England and Wales, you must be registered as a charity with the Charity Commission, unless you are excepted from registration. Information about registering as a charity is available on the Charity Commission website.
In Scotland or Northern Ireland, the HM Revenue & Customs – (HMRC) • Charities must accept you as a charity. You should contact our Edinburgh office for Scottish charities or our Bootle office for Northern Ireland charities. The addresses and telephone numbers are shown below.
How do we claim?
New charities who want to claim exemption from tax and claim repayment of tax under Gift Aid should write to HM Revenue & Customs – (HMRC) • Charities (Charities), Charity Title Section at the address below stating:
The full address, including postcode, to which we should send all communications; and
If registered, your Charity Commission registration number
If not registered, a copy of your governing document and details of activities, along with copies of any literature that explains your work.
the date on which the accounting period of the charity ends
We will confirm your status as a charity and issue a reference number that you must state on all future correspondence with us. We will also send you repayment claim forms R68 (2000) and R68 (New Gift Aid) and a form asking for the name and signature of authorised signatory who will sign your repayment claims.
A charity can reclaim tax on any donations made by individuals, whether large or small, regular or one-off - provided the conditions for the Gift Aid tax relief are satisfied. In particular, the charity will have to be able to show an audit trail from the donation to a donor who has given a Gift Aid declaration that covers that donation. A model Gift Aid declaration is available on the HM Revenue & Customs – (HMRC) • Charities website.
You will need to list on form R68 (New Gift Aid) the details of the donations for which you are claiming. You then calculate the tax you are reclaiming on the total amount of donations. The formula is on the bottom of the second page.
You should send your completed claim forms R68 (2000) and R68 (New Gift Aid) to the appropriate Bootle or Edinburgh office. The repayment claim form R68 (2000) must be signed by the authorised signatory.
Further information
The guidance for charities on our website at www.inlandrevenue.gov.uk/menus/charity.htm contains more detailed information on applying for charitable status (chapter 2) and Gift Aid (chapter 3). You can also get more information by calling the HM Revenue & Customs – (HMRC) • Charities – (Charities).
Claiming Tax Back - Frequently asked questions
How often can we claim?
You can claim as often as you like, so long as the income on which the tax has been suffered has been received by the charity. It would help us if you claimed a minimum amount of £100 each time as this enables HM Revenue & Customs – (HMRC) • Charities to process claims faster.
How long will it take to get our money?
We aim to repay all claims within 10 working days. When a charity claims repayment for the first time the process can take a little longer, as we need to ensure that all appropriate details about the charity and its authorised official are held.
How much do we get back?
This will depend upon the amount of tax that has been deducted from the income on which you are claiming repayment. The most common claim is in respect of Gift Aid. Here for every £1 given by individual donors the charity will receive an extra 28p (whilst the basic rate of tax is 22%).
Can our membership subscriptions be Gift Aided?
Yes, subject to the requirements of the Gift Aid scheme being met. The donor benefit rules may prevent subscriptions being paid under Gift Aid if the value of benefits provided to members exceeds certain limits.
Can you give me a Gift Aid declaration?
Yes, we provide a model declaration.
Can we design our own declaration?
Yes, but it must contain the name of the charity, the donor's name and address, a description of the donations to which the declaration relates, a declaration that the donations are to be treated as Gift Aid donations and a note explaining the requirement that the donor must pay an amount of income tax and/or capital gains tax equal to the tax deducted from his or her donations. Further information can be found at paragraph 3.11.2 of our guidance notes.
Can companies make donations through Gift Aid?
Yes, but as Gift Aid donations by companies are not paid under deduction of tax there is no tax to be reclaimed by the charity. The company making the Gift Aid donation gets relief against its corporation tax profits for the amount paid to the charity.
How do we claim for Deeds of Covenant?
Tax relief for payments under deed of covenant was replaced by Gift Aid on 6th April 2000. If the charity is still receiving covenanted payments under a deed that was in existence at 6th April 2000, the payments are simply claimed as payments under the Gift Aid scheme. Further information about the transitional arrangements is in our guidance notes at paragraph 3.16.
Can we claim for several years?
Yes, but use a separate schedule for each type of income for each tax year. The combined total can be put on the main claim form.
Can we claim for earlier years?
Yes, but there are different rules depending on whether the charity is a trust or a company for tax purposes.
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