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in category Charities

Is Gift Aid in the UK part of the donor's donation or a grant from the government?

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Masters in Education from Nottingham University in the UK. Also studied Masters in Islamic Studies and Islamic Banking & Finance. Political activist with interests in Geopolitics, History and Phil ...
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UK based charities often claim gift aid they use in administration is some sort of "government added fund" or "government grant".

Sadly that is not the case. The UK government makes it clear on HMRC's website that it is the donor taxpayer's money. The donor has to authorise its release and it is part of the donation. Donors who have not paid tax cannot authorise gift aid - and if they do, they have to repay HMRC not the charity that claimed it.

From HMRC's site charities are recommended to use the following wording on their Gift Aid application forms - I've personally never see such wording on charity websites or gift aid forms:

"Boost your donation by 25p of Gift Aid for every £1 you donate. Gift Aid is reclaimed by the charity from the tax you pay for the current tax year."

The Gift Aid requirements are detailed as well in legislation and HMRC rules:

"3.2.2 A Gift Aid donation is treated as being made after the deduction of the basic rate of Income Tax in force at the time the donation is made, it's that tax that the charity can reclaim provided the following conditions are met:

the charity must have a Gift Aid declaration made by the donor which covers the donation (read paragraph 3.6)

the charity must have evidence that they've explained to the donor the personal tax implications of making a Gift Aid donation - this can be done by including an explanation on the Gift Aid declaration or separately

there must be an audit trail linking the donation to the donor and their Gift Aid declaration

The donor must be charged with Income Tax and/or Capital Gains Tax for the year of donation at least equal to the tax treated as deducted from their donation. If more than one Gift Aid donation has been made in the tax year they must be added together to work out the tax the donor must be charged with.

If the donor is not charged with sufficient tax to cover the Income Tax deducted from their Gift Aid donations then they will owe the amount of the difference in tax to HMRC "

In terms of shar'a, it would then be forbidden for a charity to spend any of this money on anything other than on the donee without the donor's permission.


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