Objectives

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Objectives

• Identify the four main tax-effective giving
  methods Gift Aid, Payroll Giving, Share
  donations and Legacies
• Show the potential to increase your income
  through tax-effective giving and demonstrate
  methods of improving donor care through using
  these tax reliefs
• Create your own action plan to develop
  tax-effective giving at your charity
• Highlight the change to basic rate tax (6th April
  2008) and how it affects UK charitable giving
• Signpost the additional support available

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Tax-Effective Giving

• Gift Aid increases the gift without cost to the
  donor
• Payroll Giving promotes committed giving to new
  markets
• Share Giving opens doors to larger gifts
• Legacies allow donors to continue to influence
  the world even after death

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Gift Aid in Numbers

• Almost 900 million paid back to charities in
  2007/08
• 310 million to higher rate tax payers (2004/05)
• Still an estimated 700 million left unclaimed
  each year
• (CAF HMRC)

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Gift Aid

• For UK taxpayers (income and capital gains tax)
• Enables the charity to reclaim basic rate income
  tax (20)
• Which equates to 25 pence on the pound
• Higher rate taxpaying donors can reclaim the
  difference between the basic rate that the
  charity claims and higher rate tax they pay
• Which is a further 20 tax (or 25 pence on the
  pound).

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Transitional Relief

• From 6th April 2008 until 5th April
  2011,Transitional Relief will be added to Gift
  Aid reclaims at a rate of 3 pence on the pound
• Transitional Relief in effect makes up the
  shortfall in the value of Gift Aid to charities
  following the reduction in basic rate tax
• Transitional Relief is not a tax relief, but
  Government expenditure that will be paid to
  charities for a limited time
• From July 2008 charities will receive two
  payments per Gift Aid claim the Gift Aid tax
  relief and Transitional Relief payment

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Gift Aid How it Works

• Gift Aid is currently worth an extra 25p per 1
  donated
• It is calculated as a percentage of the gross
  donation
• Explained simply - to take home 100, a basic
  rate taxpayer needs to earn 125.00 at the
  current 20 basic rate tax
• The charity claims the 25.00
• Transitional Relief of 3.20 increases value to
  128.20
• Higher rate taxpayers can reclaim an additional
  25 for themselves or perhaps donate it to your
  charity?

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Gift Aid and Higher Rate Taxpayers
NB Individuals that complete the self assessment
form can donate any tax repayment that is due to
them directly to charity - Gift Aid can also be
applied to this donation (see appendix 9 9a).
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Gift Aid Why?

• Its free money!
• With a donors permission you can reclaim Gift
  Aid on their donations over the previous six
  years
• Retrospective claims (pre 6th April 2008) are
  worth an extra 28.2 too - for a 50 a year gift
  thats an extra 84!
• Donors want you to maximise the value of their
  gift

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Gift Aid The Rules

• Donor must pay at least as much income tax or
  capital gains tax as the charity claims back in
  Gift Aid from HMRC
• Donor must complete a Gift Aid declaration (paper
  or oral)
• Identifying if its a single gift, for a specific
  period of time and/or for all future gifts and
  specify if they wish to backdate
• Donor thank you gifts cannot exceed HMRCs
  Donor Benefit Rules

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Gift Aid The Declaration

• Declarations can be made in writing or orally and
  must contain
• Donors full name and home address including
  postcode
• Name of the charity
• Details of the gift(s) to which the declaration
  relates - specify if they wish to backdate and
  Gift Aid future donations
• Confirmation that the donor has paid UK income
  tax or capital gains tax sufficient to cover the
  amount that the charity reclaims

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Gift Aid Donor Benefit Rules

• Donation
• Donation 101-1,000 max benefit of 25
• Donations 1,000 max benefit of 5 of the
  gift (max 500)

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Gift Aid Connected Persons Rule

• If a donor receives a benefit that exceeds HMRCs
  Benefit Rules, then donations from individuals
  connected to that donor may not qualify for Gift
  Aid
• This is most common when the donor is taking part
  in a sponsored event where there are clear
  benefits such as flights and accommodation (see
  appendix 3, 6 7)

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Gift Aid Keeping Records

• Paper
• Electronic (hard drive, CD-Rom, disc etc)
• Scanned documents or microfiche
• Oral declarations can either be stored as
• a recorded phone call, or
• a follow-up letter confirming the details of the
  oral declaration - sent from the charity to the
  donor (including a 30-day cool off period)
• Records must be readily available in an audit

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Gift Aid A Clear Audit Trail

• Gift Aid declaration
• Bank statements
• Donation records (receipts, cash book entry etc)
• Correspondence with donor may be required

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Gift Aid The Audit

• Look at accounting records, systems and
  procedures
• Charity must produce the sample population
  (identified by HMRC) of
• records of donations (receipts and/or letters of
  confirmation)
• Gift Aid declarations
• bank records
• Identify other tax risks (major donors, shares,
  gifts of land and property)

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Administrative Changes to Gift Aid

• Extrapolation charities can now repair errors
  identified within an audit population. HMRC will
  only extrapolate the repaired rate across the
  population (rather than the error rate found in
  the first instance)
• De minimis error level charities claiming less
  than 2,500 pa in Gift Aid will not be penalised
  for errors in claims of less than 4 of an audit
  population

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Administrative Changes to Gift Aid

• Aggregated claims donations of no more than
  10.00 can be aggregated to a total of 500
  within claims (reducing admin)
• HMRC Guidance improvement online resources will
  be improved and HMRC are working with the sector
  to develop a number of proposals to reduce the
  administration associated with Gift Aid. See
  www.direct.gov.uk/giftaid for more information

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Gift Aid Making Claims

• Registered charity, exempt or request excepted
  status (such as clubs)
• Register with HMRC Charities (provide basic
  details)
• Complete ChN1 form (signatory and bank details)
• Receive unique reference number, forms and
  guidance notes
• Fill in R68(claim) cover note and R68(Gift Aid)
  schedule(s)
• Payment processed by HMRC
• (see appendix 3 for further details)

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Gift Aid Maximising Take Up

• Newsletter articles
• Specific or regular mailings
• Briefing staff and volunteers
• Envelope collections
• Sponsor forms
• Website
• Incentives (within Benefit Rules)

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Payroll Giving

• Deducts the gift from earnings before income tax
  is paid, reducing the donors tax bill with
  immediate effect
• Promotes regular, reliable income to UK charities
• There are over 2.5 million UK companies and 24
  million employees using PAYE
• Over 10 million employees have access to Payroll
  Giving schemes
• Donor numbers have increased by nearly a third
  year on year between 2006/07 and 2007/08
• SBS

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Payroll Giving How it Works

• Payroll Giving benefits employees with immediate
  tax relief on their donations,
• If a UK taxpayer donates 10, it costs them just
• 8 for a standard rate taxpayer (at the 20 basic
  rate)
• 6 for a higher rate taxpayer (at the 40 higher
  rate)

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Payroll Giving PGAs

• An employer must sign up with a Payroll Giving
  Agency
• (PGA), who will
• Process all the paperwork
• Deduct a small administration charge from
  employee donations
• Provide support to charities and employers in
  setting up the scheme
• Provide disbursement statements (on request) to
  charities to track donors and payments

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Payroll Giving The Process

• Contact key decision maker
• Involve PGA
• Activate internal systems
• Access employees
• Promote internally
• Employee fills in mandate
• Employer makes deductions before tax
• Deductions forwarded to PGA
• PGA sends donations to charity

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Payroll Giving Getting Started

• Fundraisers and volunteers
• Drip-drip approach
• Professional Fundraising Organisation?
• Consortium

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Payroll Giving How to Promote

• Appoint internal champions and involve department
  heads
• Use briefing or training sessions
• Make Payroll Giving a part of the employers
  induction pack
• Email and intranet
• Teaser campaigns and canteen promotions
• Leaflets

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Payroll Giving Managing the Relationship

• Thank the donor and build relationship (treat as
  you would any other regular donor)
• Thank the employer and promote the Quality Mark
• Promote matching to employer
• Keep informed
• Upgrade

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Payroll Giving The Quality Mark

• Enables employers to publicly demonstrate their
  commitment to good causes by making Payroll
  Giving available to staff, through a logo and
  certificate
• Bronze, Silver Gold Awards are given to
  employers that achieve target participation
  levels and show commitment to the scheme
• Funded by Government, run by the Institute of
  Fundraising and administered by the Payroll
  Giving Centre

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Payroll Giving - National Excellence Awards

• Held in October each year at HM Treasury in
  London
• 7 Awards presented to employers with excellent
  schemes
• Attracts ministers and government officials

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Share Giving

• Provides donors with an opportunity to claim
  income tax relief on donations of shares made to
  charity
• For smaller charities, regular gifts of shares
  are not common, although they can be received as
  part of a legacy
• The average a share gift is worth as much as
  7,000
• 100 million is given in shares each year
• (CAF HMRC)

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Share Giving The Benefits

• Individual donates shares worth 10,000
• Basic rate taxpayer could save up to 20 income
  tax costing them only 8,000
• Higher rate taxpayer could save up to 40 income
  tax costing them only 6,000
• Capital gains tax does not apply to charitable
  gifts of shares

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Share Giving Promotional Strategy

• Company newsletters
• Charity newsletter
• Mailings to donors
• Face to face with major givers
• Financial Advisers

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Share Giving Transferring Shares

• Increasingly shares are transferred
  electronically - the process is similar to the
  manual transfer of share certificates, but uses
  Brokers to transfer shares from the donors
  nominee (CREST) account to the charity's account

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Share Giving Transferring Shares

• Charity/donor requests a Stock Transfer Form from
  the Registrar of Shares (or agent) identified on
  the certificate
• Stock Transfer Form is received, completed and
  signed by both the charity and the donor
• Completed Stock Transfer Form form returned to
  the Registrar of Shares with the original Share
  Certificate
• Charity receives a new Share Certificate in their
  name
• Donor keeps a record of the value of the shares
  on the day of transfer

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Share Giving Issues to Consider

• Assign responsibility in your charity to one
  individual
• Getting support from a stockbroker or your bank
• Ethical policy
• Keep or sell
• What to do with small amounts
• Consider how shares holdings are shown in annual
  accounts
• Lock-in shares and special conditions beware!
• DO NOT GIVE FINANCIAL ADVICE!

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Legacies

• Inheritance tax is charged on the value of an
  estate over and above the inheritance tax
  threshold (nil-rate band)
• Inheritance tax is currently charged at 40
• Charitable legacies (bequests) are free of
  inheritance tax
• The 2008/2009 inheritance tax threshold is
  312,000 for individuals and 624,000 for married
  couples or civil partnerships
• (increasing to 350,000 and 700,000
  respectively by 2010)

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Legacies Motivations

• Existing donor of the charity
• Connection with the cause
• Friend/relative that has a connection with the
  cause
• Always supported (even if not a donor)
• To save tax, or to stop tax man getting his hands
  on any money
• No one else to give it to
• No one else needs it

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Remember a Charity
A consortium of over 140 charities, hosted by the
Institute of Fundraising, that works to increase
awareness of charitable legacies
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Legacies Key Statistics

• Only 14 (1 in 7) of wills that go to probate
  include a charitable bequest
• Currently legacy income is worth over 1.6
  billion annually
• A small increase in charitable bequests could
  generate significant income for the voluntary
  sector especially for small charities
• Pecuniary legacy has an average value of 3,000
• Residuary legacy has an average value of 50,000!
• (Legacy Market Audit 2006, Legacy Foresight)

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Legacies Smaller Charities

• Legacy stories in newsletters
• Local contacts
• Solicitors and trustees
• Articles in local paper
• Including legacy request in talks
• Make sure everyone knows that your charity needs
  the money!

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Legacies Larger Charities

• Communication programmes
• Seminars
• Advertising (Law Gazette)
• Direct appeals to the database
• Dedicated staff to visit
• Pledge cards

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Getting Help

• For one-to-one advice about how to increase your
  fundraising through tax-effective giving,
  contact the Institute of Fundraisings
  Tax-Effective Giving team
• Tax-Effective Giving Helpline 0845 458 4586
• Email taxback_at_institute-of-fundraising.org.uk
• Web www.tax-effectivegiving.org.uk
• Best Practice and Mentoring Forum online (late
  2008)
• Guidebook CD Make Giving Go Further
• HMRC Helpline 0845 302 0203

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Useful Websites
www.tax-effectivegiving.org.uk www.direct.gov.uk/g
iftaid www.institute-of-fundraising.org.uk www.hmr
c.gov.uk/charities www.payrollgivingcentre.org.uk
www.rememberacharity.org.uk
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