Tax situation with Gift Aid - Query for those in the know
Discussion
Hi All,
Situation: We set up a action group to raise funds to oppose a local development. The threat has now disappeared. We raised in excess of £4k and now want to close down the action group. We would like to split the funds raised between two registered national charities, that do fantastic work in our county.
However, we would also like to use “Gift Aid” to ensure the charities get the maximum benefit. My thoughts would be that we get a couple of trusted local people who pay tax at 40%, Each person would receive £2k from the fund and then donate £2k to the charity via Gift Aid, so the charity would get £2.5k each. They would also add the amount they can claim on their end of year tax returns bringing the total to £3k for each charity. Is this possible or are we breaking some tax rules?
Many thanks in advance for the words of wisdom that will arrive in the responses.
Situation: We set up a action group to raise funds to oppose a local development. The threat has now disappeared. We raised in excess of £4k and now want to close down the action group. We would like to split the funds raised between two registered national charities, that do fantastic work in our county.
However, we would also like to use “Gift Aid” to ensure the charities get the maximum benefit. My thoughts would be that we get a couple of trusted local people who pay tax at 40%, Each person would receive £2k from the fund and then donate £2k to the charity via Gift Aid, so the charity would get £2.5k each. They would also add the amount they can claim on their end of year tax returns bringing the total to £3k for each charity. Is this possible or are we breaking some tax rules?
Many thanks in advance for the words of wisdom that will arrive in the responses.
gf15 said:
We set up a action group to raise funds to oppose a local development. The threat has now disappeared. We raised in excess of £4k and now want to close down the action group. We would like to split the funds raised between two registered national charities, that do fantastic work in our county.
Who is "we"?There have been many such instances which end up in court because people who have given money for one purpose get angry when it's actually used for another.
You should make a concerted effort to ask each person who contributed to the action fund whether they want (A) Their money back (or at least the unused proportion of it), or (B) for their money to be given to your two preferred charities.
Otherwise if you are an official involved in running the action group you may leave yourself open to money claims against you.
gf15 said:
However, we would also like to use “Gift Aid” to ensure the charities get the maximum benefit. My thoughts would be that we get a couple of trusted local people who pay tax at 40%, Each person would receive £2k from the fund and then donate £2k to the charity via Gift Aid, so the charity would get £2.5k each. They would also add the amount they can claim on their end of year tax returns bringing the total to £3k for each charity. Is this possible or are we breaking some tax rules?
Many thanks in advance for the words of wisdom that will arrive in the responses.
That sounds a bit fraudulent.... if they didn't earn the money in the first place then I don't see how you could legitimately push the money through their account just to get the 40% back? I don't suppose anyone would notice/care though.Many thanks in advance for the words of wisdom that will arrive in the responses.
Eric Mc said:
Only those who pay tax can nominate a charitable donation under Gift Aid. Who is actually making the donation here?
Hi Eric, Ozzie & KFC,The funds were raised through local events, such as a country & western event in the village hall that had an auction of promises (ride in a super car,etc), Christmas fare, coffee mornings and a casino evening. I am the treasurer and we only have 3 specific named donations, all of which are being returned to the donors in full.
After the above deductions, we are left with just over £4k. I am the treasurer and we have a small committee of 3 people.
We have called a meeting for next week in the village hall, that is widely published to explain to all that we are closing down the fund and plan to donate all funds to a couple of registered charities. We also have advised all that they can request funds for local charities / organisations, should they wish. We have a published agenda and a template for requesting funds (we expect a bun fight here) with published timelines. We have sought legal advice on who controls the funds and it is the committee and we can allocate the remaining funds as we wish (after named donors have had their donations returned). The decision of the committee is final and not up for discussion / appeals. We have used the "Institute of Fundraising" guidelines throughout.
All donations will require a receipt and will be Emailed to all interested parties showing all funds received and how they have been dispersed.
We have a Action Group bank account, so we can issue cheques direct to the charities or issue a cheque to the individuals who would then Gift Aid the money to the agreed charities, if this is legal / above board.
Finally for anyone who is thinking about doing a similar thing with an action group, you will be amazed how aggressive people get, to get their hands on funds for things they believe in. We have had requests to borrow money from the funds and now even the people who were against the Action Group and never supported any of the events want a say in where the funds end up.
Is Gift Aid the way to go or issue cheques direct to the beneficiaries? All advice appreciated.
How local is local.
A small village in the middle of nowhere?
I suspect that it might be better to invest this money back into the village. Would make the people presumably all from this village, or nearby villages, who 'donated' to the cause happier I suspect. If it is a small village is there a Rotary Club type thing? Plant trees/flowers etc to make the village look better?
A small village in the middle of nowhere?
I suspect that it might be better to invest this money back into the village. Would make the people presumably all from this village, or nearby villages, who 'donated' to the cause happier I suspect. If it is a small village is there a Rotary Club type thing? Plant trees/flowers etc to make the village look better?
gf15 said:
We have a Action Group bank account, so we can issue cheques direct to the charities or issue a cheque to the individuals who would then Gift Aid the money to the agreed charities, if this is legal / above board.
The point of gift aid is so that the charity is basically reclaiming your "income" tax on your contribution. For you to pay the money to person <X>, who then makes a Gift Aid donation - surely person <X> needs to declare that they received this money (£2k if you split it between two people) as taxable income. Which means that they would be taxed on it at 40% (assuming higher rate tax payer as you suggested) - and the charity would get the benefit.Gassing Station | Finance | Top of Page | What's New | My Stuff