Questions about Gift Aid for occasional taxpayers

dag_2

Hello.

I'd like to give money to charities, but my lifestyle is a bit chaotic. In some tax years, I'm liable for income tax, but in other years, I'm not.

I understand that if you Gift-Aid a donation but you haven't paid the necessary tax to cover it, then HMRC will send you a bill for the difference.

Questions:

• How quickly do they send out the bill?
• How long do you have to pay?
• How does HMRC enforce it?
• What would be the worst-case scenario, if you Gift-Aided a donation but then fell on hard times, and couldn't pay the HMRC bill for it?

Also, does the donation have to be made in the same year that you will be paying enough tax to cover it - or can you Gift-Aid on the strength of a previous year's tax? If so, then how far back can you go?

If you're only able to Gift-Aid on the strength of the current year's tax, then what happens if your income drops off, and doesn't come up to taxable levels for the whole year? Besides, how are you supposed to know what your income is for any given year, and therefore your tax liability for that year, and therefore whether you can Gift-Aid or not, until after the year has ended?

Also, what happens to donations that are made close to the end of the tax year?

I find that the information on the HMRC website is very vague about this. It assumes that at any given time, you're either a qualifying taxpayer, or you're not, and there's nothing "in-between", and that you can switch between these two states, and that you will always know which of these two states you are in. But the very fact that income tax (and I believe CGT too) is assessed in arrears means that it's not that simple.

Can anyone clarify the rules? Thanks.

oldtoolie

An interesting question.

You might find a definitive answer from the Charities Aid Foundation. http://www.caf.org.uk/

They operate the Charity Account scheme. With that, you could put money into a Charity Account when you are sure you are eligible for Gift Aid near the end of a tax year. CAF collects the Gift Aid rebate and puts it in your account at the time of the donation, so everything would be ok. Then the money in that account is used to make charitable gifts later.

Larry Boyd
Tools for Self Reliance
https://www.tfsr.org

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Savvy_Sue

oldtoolie wrote: »

An interesting question.

Isn't it just? Please let us know if you get a definitive answer!

Of course one way round it is NOT to make the Gift Aid declaration at the time you make the gift, but wait until the end of the tax year, then send in the declarations if it's clear you're a taxpayer this year. Because you can definitely make a retrospective declaration (up to six years) and you can also make either a 'standing' declaration ("all gifts") or a 'single' declaration ("this gift / the gift which I made ...")

It is a bit of a palaver for you, but what I would do if you sent my charity a gift without a GA declaration would be to write you a nice thank you letter, and say "If you're a tax payer we can have some more dosh if you fill this form in" (obviously I put it more politely than that!) If you hung onto the form and sent it back later (at the end of the tax year) I'd action it then. I have all the options on my form: this gift, that gift, this and all future, this and all in the past 6 years ...

Plus, even if you sent it back after we'd sent our claim in, we could still claim next time ...

Also you don't HAVE to use the charity's own form: you can just write and say "I am a taxpayer [for the tax year X to Y] so please treat the gift of £N I made earlier this year as Gift Aided". Or something like that. You could add something like "This is a single declaration for this tax year only". Which should cover your back against the charity claiming Gift Aid when they shouldn't have done and the taxman coming after you ...

dag_2

An interesting question.

You might find a definitive answer from the Charities Aid Foundation.

Hmm, thanks for that, but I don't really see how it answers the question.

dag_2

Of course one way round it is NOT to make the Gift Aid declaration at the time you make the gift, but wait until the end of the tax year, then send in the declarations if it's clear you're a taxpayer this year. Because you can definitely make a retrospective declaration (up to six years) and you can also make either a 'standing' declaration ("all gifts") or a 'single' declaration ("this gift / the gift which I made ...")

That's brilliant! Thanks for that.

dag_2

Because you can definitely make a retrospective declaration (up to six years) and you can also make either a 'standing' declaration ("all gifts") or a 'single' declaration ("this gift / the gift which I made ...")

Ah - I've just had a thought about retrospective declarations. What if they don't know that the donation came from you?

Presumably this means you need to identify yourself for every donation you ever make, even the ones which you don't think you'll be able to gift-aid? Right? Otherwise, it would be too easy to gift-aid a donation that you never made in the first place!

Savvy_Sue

dag wrote: »

Ah - I've just had a thought about retrospective declarations. What if they don't know that the donation came from you?

Presumably this means you need to identify yourself for every donation you ever make, even the ones which you don't think you'll be able to gift-aid? Right? Otherwise, it would be too easy to gift-aid a donation that you never made in the first place!

You're quite right, you can't do completely anonymous donations if you want to Gift Aid them - that's why a lot of churches use little envelopes for their weekly collections, you have your personal set (may be identified by name or by number) and if you put cash in the Treasurer can work out who it came from and do the Gift Aid claim with confidence.

However you CAN ask for your gift to be kept confidential, for example if it's a small charity and you don't want everyone who works there to know you've given something. In that case best to send the gift to the Treasurer and mark the envelope Private.

dag_2

Thanks for that - so the best thing to do is to fill in the form with my details anyway, when I make a donation - but don't tick the "I want to Gift-Aid this donation" box until I'm absolutely sure that my tax is going to cover it. Right?

Thanks again.

Savvy_Sue

dag wrote: »

Thanks for that - so the best thing to do is to fill in the form with my details anyway, when I make a donation - but don't tick the "I want to Gift-Aid this donation" box until I'm absolutely sure that my tax is going to cover it. Right?

In your situation, I think that is what I would do. I just hope I'd be sufficiently organised to keep a note of everywhere I'd given money to! Although of course it's worth doing just for your own tax return, Tax Credits claim etc ...

ashfan83

I've been an on-off tax-payer too, as I've been a student for the last few years, so I never tick the gift-aid box. But sometimes I have had correspondence back saying that it has been ticked...sounds a bit dodgy to me, I think some of them just tick it when they receive your form anyway!

Savvy_Sue

ashfan83 wrote: »

I've been an on-off tax-payer too, as I've been a student for the last few years, so I never tick the gift-aid box. But sometimes I have had correspondence back saying that it has been ticked...sounds a bit dodgy to me, I think some of them just tick it when they receive your form anyway!

It might be that whoever is sending out the acknowledgements is operating on auto-pilot: they shouldn't just tick it if you haven't.

What we try to do in our acknowledgement is say that IF they are a taxpayer, then we can reclaim Gift Aid, and sometimes enclose a form. Depends how much we know about the person: if I know it's a student I wouldn't usually send the form. If it's a big fat donation I would definitely send the form! If I know someone well enough to be seeing them regularly, I'll even talk to them! Of course it can be a bit delicate, gently enquiring whether someone's a taxpayer or not when you know they're not working, but if they know us well enough to give us lots of money, they know us well enough to be asked personal questions ...

HMRC have the right to audit your Gift Aid records, and go through them with a fine toothcomb when they do. So IMO any charity ticking boxes they shouldn't may one day get a nasty shock!