HMRC Charities Overview Specialist PT Charities, Savings & - - PowerPoint PPT Presentation

HMRC Charities Overview

Specialist PT Charities, Savings & International Thursday 28th April 2016 This is HMRC's current guidance - however this may be subject to change - due to legislative and guidance changes. Please refer to HMRC Charities published guidance on Gov.uk in the first instance.

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Topics

• HMRC’s Charity Outreach Team
• Gift Aid Overview
• Gift Aid Small donations Scheme (GASDS)
• Making a Repayment claim
• How to apply for recognition as a charity for tax purposes
• Community Amateur Sports Club (CASC)
• Payroll Giving
• Value Added Tax and Charities (VAT)

HMRC’s Charity Outreach Team

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HMRC’s Charity Outreach Team

• Team of 8 experienced staff - set up in June 2014
• To help charities with their GASDS & GA claims
• Registering & enrolling for our online services
• Supporting our Charities Helpline
• Presentations

Gift Aid Overview

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What is Gift Aid? What is Gift Aid?

• Donation from a UK Taxpayer

£100

• Charity can claim

£25

• Donor earned £125 before basic rate of Income

Tax @20% was deducted

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Gift Aid Requirements

The 5 main requirements of Gift Aid are;

• Gift of a sum of money must be made to a Charity / CASC accepted by

HMRC

• Donations must be from an individual who is a UK taxpayer
• Donor must make a valid Gift Aid declaration
• Charity / CASC must be able to show receipt of donation
• Payment must not have any conditions for repayment (to the donor)

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That tax can be

• Income Tax paid at 20%, 40% or 45% rate
• Tax deducted from Bank or Building Society interest at 20% rate
• Tax deducted from dividend income at 10% up to 5 April 2016
• Capital Gains Tax paid at 18% or 28%

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About the Donor

The Donor must be an Individual (not a Limited Company or PLC) who is;

• Resident in the UK, or
• Non-Resident in the UK - but must have paid sufficient UK tax
• Council Tax & VAT cannot be used to cover Gift Aid
• Residents of Isle of Man / Channel Islands / Republic of Ireland

are Non Resident for UK tax purposes

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Gift Aid Declaration

A Gift Aid Declaration must contain;

• Name of charity or CASC
• Name of donor
• Ideally, we would like to see; Mr John Smith
• We will accept; John Smith, J Smith, Mr J Smith
• We will not accept; Mr Smith, Smith, John
• Donor’s home address
• Description of payment(s)
• Declaration that payments(s) are Gift Aided
• Must include a note that explains that the donor must have paid sufficient UK

income or capital gains tax (not including VAT or Council Tax) to cover the tax claimed by the charity

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Addresses on Gift Aid Declarations

• 11, WA8 4LY or Dunroamin, WA8 4LY
• 11, Park Street, Widnes, WA8 4LY 
• 11, Park Street, WA8 4LY 
• 11, WA8. ×
• Park Street, Widnes, WA8 4LY ×
• 11 Park Street. ×
• c/o Wetherspoons, Park St, Widnes ×

YES  NO ×



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Sponsorship Gift Aid declaration form

A Sponsorship Gift Aid declaration form must contain;

• Name of participant
• Name of event
• Sponsor’s Home Address
• Amount of donations collected

Must also contain the following statement;

• Name of charity the event is in aid of
• Sponsor’s Full Name
• Gift Aid tick box
• Date that pledged donations were collected

If I have ticked the box headed ‘Gift Aid? √’, I confirm that I am a UK Income or Capital Gains taxpayer. I have read this statement and want the charity or Community Amateur Sports Club (CASC) named above to reclaim tax on the donation detailed below, given on the date shown. I understand that if I pay less Income Tax / or Capital Gains tax in the current tax year than the amount of Gift Aid claimed on all of my donations it is my responsibility to pay any difference.

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Sponsorship Gift Aid

Charity: The HMRC Auditors Benevolent Fund Name of Participant: John Smith Event: The 2016 Bootle Marathon

Full Name Home Address Amount Total Please treat as Gift Aid Clark Kent 21, Worthing Drive, Brighton BN4 1ZP £1 per mile £26  Harry Potter 6, Nottingham Close, Derby D4 2YP 50p per mile £13 Bob the Builder 14, CH2 1PY 50p per mile £13 

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Joint Donations

• Donation drawn on a joint bank account & charity has been

given a Gift Aid declaration by one account-holder only.

• Charity can assume that donation is from the donor who has

made a Gift Aid declaration - even if cheque is signed by the

• ther account holder.
• If in doubt seek clarification from the donor e.g. a cheque

drawn on the sole account of the other account-holder.

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Most Common Errors

• No declaration held by charity
• Incomplete/incorrect Gift Aid declarations
• No evidence of receipt of donation
• Payment not received from an Individual – e.g. company donations
• Payment not a Gift

Save the World Charity

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Retention of Declarations

For Audit purposes;

• Records should be kept for a period of 6 years (after the last donation)
• Must be available for inspection
• Can be retained as a scanned document

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Charity Auction

£40

£100 £60

Shirt valued at £40, sold for £100 so Gift Aid can be claimed on £60.

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Charity Auction

£250

£250

Signed shirt sold for £250. No Gift Aid can be claimed as is does not have a recommended retail price.

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Charity Dinners

• The purchase of a ticket for Fund-raising Dinner /

Charity Ball is not a Gift.

• Ticket costs £100 (includes £50 donation to Charity)
• not a Gift.
• Ticket is £50 & a ‘suggested’ donation of £50 is

requested – the donation could be a Gift?

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What is a benefit?

• Any item or service provided by the charity or a third

party to the donor or a person connected with the donor as a consequence of making the donation

• When someone makes a donation, you might want to give the donor something

in return (an item or service) to say thank you. This is known as a ‘benefit’

• We have to apply the benefit rules as there limitations on what a donor can

receive.

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Gift Aid donor benefit limits

• You can claim Gift Aid on the donation if the value of the benefit doesn’t exceed

certain limits, for example:

• From 6 April 2011; The maximum limit for a series of benefits given to a donor

was increased to £2,500 per tax year (previously £500 per tax year)

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Not Gifts

You can’t claim on donations;

• The purchase of books, jumble sale items,

bedding plants, food, alcohol etc.

• Admission to events e.g. concerts, recitals etc.
• Golfing fees, Day Trips, Transport etc.
• Fees to adopt / re-home an animal
• Raffles, lottery tickets & 200 Clubs
• Hire of own premises

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Time Limits for claiming Gift Aid

• A charity which is a Company for tax purposes

must make any claim within 4 years from the end

• f the accounting period to which the claim relates.
• A charity which is a Trust for tax purposes must make any claim within 4

years of the end of the tax year to which the claim relates.

Any Gift Aid Questions?

Gift Aid Small Donations Scheme (GASDS)

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Small Charitable Donations Act 2012

(Gift Aid Small Donations Scheme)

• From 6 April 2013; Charities & CASCs that receive small cash donations of £20 or

less will be able to apply for a Gift Aid style repayment without the need to obtain Gift Aid declarations for those donations

• GASDS is a public spending initiative (not a repayment of tax) that gives Charities

& CASCs a top-up payment on donations they receive

• Currently the total amount of the small donations is capped at £5,000 maximum

per tax year giving a top-up repayment of £1,250

• This amount will increase to £8,000 maximum per tax year for GASDS collected

from 6 April 2016 and the top-up repayment will increase to £2,000

Save the World Charity

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What is a small donation?

• A cash donation of £20 or less from an individual
• Donations must be collected and banked in the UK
• Membership Fees not covered by a Gift Aid Declaration are not small donations

under this scheme

• Cash donations from Companies or Trusts cannot be GASDS
• No benefits can be given to an individual that makes a small donation

Save the World Charity

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Eligibility for claiming GASDS

• The charity must have been in existence with HMRC for at least 2 full tax years

before the year of claim

• Made successful GA claims in 2 of the previous 4 tax years. Without a gap in

claims of 2 or more years

• Charity has not incurred an HMRC penalty in respect of GA or GASDS claims in

the previous 2 tax years Why? - A good Gift Aid record assures HMRC that charity has appropriate internal processes in place to operate GASDS correctly

Any questions on GASDS?

Making a Repayment Claim

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Charity Repayment Claim Options

HMRC Charities

HMRC Data Processing Centre Option 2 Government Gateway Option 3

• 3rd. Party

Software (OOO’s of donors) Gift Aid, Other Income & Charity Small Donation scheme schedules Option 1 Paper Charity Claim form - ChR1 (2013) Extracted Claim information By post Charity Repayment Service (Up to 1,000 donors) On line From own Laptop or PC Claim data

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Paper ChR1 Claim Form + ChR1CS (Continuation sheet)

• Only available direct from HMRC
• Form will be handwritten, scanned and data extracted
• ChR1 - space for 15 Gift Aid donors + 6 Other taxed income items + 2

Community Buildings + 5 Connected charities

• ChR1CS - space for 5 more extra Gift Aid donors
• Photocopies not acceptable
• Typed schedules & Covering letters not acceptable

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Charity Repayment Claim Service

Introduced in April 2013

• Only charities registered with HMRC can use the Service
• Must first register with Government Gateway on line
• ID & Activation PIN posted to authorised official - Must activate within’ 28 days
• Then need to Register and activate online service
• Separate service for Agents that submit claims on behalf of charities

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Gift Aid Online Schedule

Any questions on the Making A Claim?

Apply for recognition as a charity for tax purposes

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What Does this mean?

The Jurisdiction + Registration condition means that ‘Charities’ in;

• The UK
• The European Union (EU)
• The EEA (Iceland, Liechtenstein & Norway)

Can now all apply to HMRC to be accepted as a charity for tax purposes

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Charitable Purposes

Charitable purposes include things that contribute to:

• relieving poverty
• education
• religion
• health
• saving lives
• citizenship or

community development

• the arts
• amateur sport
• human rights
• religious or racial harmony
• the protection of the environment
• animal welfare
• the efficiency of the armed forces,

police, fire or ambulance services

• disability

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Do Charities pay Tax?

Investment Income

• Exempt from UK tax on most types of investment income incl. income from
• verseas investments, they cannot claim back the 10% tax credit paid on UK

dividends Bank & Building Society interest

• Charities should have their interest paid gross without deduction of the 20%

Basic Rate Tax Income from land & property

• Exempt from Tax on rental income from land or property

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Do Charities pay Tax?

Capital Gains Tax (CGT)

• Gains made by charities are exempt if used for charitable purpose only

Stamp Duty Land Tax (SDLT)

• Charities usually exempt when buying or leasing property to be used for

charitable purpose Business rates relief

• Charities are usually entitled to 80% business rate relief – some local

authorities give 100% business rate relief

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What you need to register as a Charity with HMRC

Officials details;

• You need to have a minimum of 3 different trustees
• 1x Authorised Official
• 2x Other Officials

(names, addresses, phone numbers, dates of birth, national insurance numbers) Charitable evidence;

• Governing document
• Rules/Constitution, Trust deed, Memorandum and articles of association, Will, Act
• f Parliament, Other

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What you need to register as a Charity with HMRC

Regulator details;

• Copy of notification of registration from any regulators

Charitable objectives;

• What your organisation does

Financial accounts;

• Last 3 months
• Provide accounting period end date

Bank account details;

• Account name, number and sort code

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What records are required by HMRC?

• Blank Gift Aid declaration form(s)
• Appeal leaflets and membership forms
• The selected Gift Aid declarations & Sponsorship forms

(paper or scanned images) Account records - ‘Audit trails’;

• Banking records, Paying-in book, Bank statements, donation envelopes etc.

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Audit trail

Audit trail from each donor;

• Through the charity’s books & records and then into the charity’s bank

account.

BANK

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Does your charity need to register with a Charity Regulator?

• If your Charities income exceeds £5000 you must

register with the Charity Commission (England & Wales),

• All charities in Scotland & NI MUST register with their

regulator Office of the Scottish Charity Regulator (OSCR)

• r the CCNI before registering with HMRC.

If not, may still be able to apply to HMRC to be accepted as a charity “for tax purposes”

• CASC’s (Community Amateur Sports Clubs) must

register with HMRC.

• Some Charities are exempt from registering with the

charity commission e.g. Churches, Schools etc….

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Register with HMRC Online – WWW.GOV.UK

BANK

• Search for – Get recognition from HMRC for your Charity

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Charity Variation form (ChV1)

Introduced in July 2010 and must be completed and sent To HMRC 30 days before a claim if;

• Name & address has changed
• Authorised official and/or the Responsible person(s) has changed
• Bank account has changed
• The Charity’s Trustees or Directors have changed
• Charity has appointed a new nominee

Any questions on registrations?

Community Amateur Sports Club CASC

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CASC Overview

What are the benefits for registering as a CASC?

• 80% mandatory rate relief
• Claim Gift Aid on qualifying donations from individuals
• Claim Gift Aid Small donations on small cash donations from individuals
• Exemption from Corporation Tax on UK trading profits if the turnover from that

trade is less than £50,000 per year

• Exemption from Corporation Tax on UK property income if the total income

from property is less than £30,000 per year

• Full exemption from Corporation Tax on interest received and on chargeable

gains

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CASC Overview

• To register as a CASC you must provide facilities for eligible sports and

encourage people to take part.

• Under the new rules from 1 April 2015, at least 50% of members must take

part You must also;

• be set up with a formal constitution, known as a governing document
• be open to the whole community and have affordable membership fees
• be organised on an amateur basis
• be set up and provide facilities in the UK, the EU, Iceland, Liechtenstein or

Norway (but in one country only)

• be managed by ‘fit and proper persons’

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Eligible Sports

All of the sports provided must be recognised on the Sport England website Some of the sports not recognised are;

• Kick Boxing
• Bridge
• Cheerleading
• Boat restoration

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Governing Document

• This is the document that sets out the purpose and structure of your club. It

may also be called a ‘memorandum and articles of association’ for a limited company or a constitution for an unincorporated club It must be;

• Set out how you meet the eligibility criteria for registering as a CASC
• State that the assets left after the club closes are only used by another

registered CASC, charity or related community sport

• Model clauses are available on our website www.gov.uk

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Membership Fees

• Membership fees cannot be more than £1612 per year – otherwise they are

not eligible

• Fees over £520 per year – the club must make provision for members on

lower incomes to participate. The provision must be publicised.

• The cost of participation is the membership fee plus any additional costs such

as green fees, court fees, purchase of equipment or hire of equipment.

• Members should participate at least 12 times a year and also partly in peak

time

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Non member income

• A CASC cannot receive income from non members of more than £100,000

such as visitor green fees, visitors parking fees and visitor income in the bar

• r for catering

Trading Profits

• Your CASC is trading if it sells good to non members. You’ll have to pay tax
• n the profits if your turnover is more than £50,000. It doesn’t count as trading

if your club sells goods or services to voting members, e.g. it runs a bar exclusively for members. In this case you don’t need to pay tax on profits and the income will not count towards the £50,000 limit.

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Organised on an amateur basis

CASCs must;

• not make a profit, unless this is reinvested in the club and spent only on

promoting participation and providing facilities for eligible sports

• Not pay more than £10,000 in total to all players in a year
• Provide only the benefits normally associated with a CASC
• Only pay expenses for matches and tours where players take part in and

promote the club’s sport

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Running a CASC

Who’s fit to run your CASC;

• Managers must provide information for the fit and proper person test
• The manager can provide a draft declaration which the CASC keeps for 4

years after they leave

• HMRC require up to 2 ‘authorised officials’ within the CASC to manage its tax

and Gift Aid and 2 to 4 ‘responsible persons’ to be legally accountable for running your CASC Notifying changes

• CASCs must use form ChV1 to amend their record with HMRC – this is

available on our website www.gov.uk

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What you need to register as a CASC with HMRC

Officials details;

• You need to have a minimum of 3 different officials
• 1x Authorised Official
• 2x Other Officials

(names, addresses, phone numbers, dates of birth, national insurance numbers) Governing document

• Rules/Constitution or Memorandum and articles of association

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What you need to register as a CASC with HMRC

Financial accounts;

• Last 12 months

Bank Statements

• Last 3 months

Bank account details;

• Account name, number and sort code or;
• Building society account – including roll number

Club rule book

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How to register as a CASC with HMRC

Use the CASC (A1) form from our website www.gov.uk

• Search for CASC (A1)

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How to register as a CASC with HMRC

• Select – Community Amateur Sports Club Registration Form CASC (A1)

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How to register as a CASC with HMRC

• Select – Community Amateur Sports Club Registration Form: Complete on

screen

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How to register as a CASC with HMRC

• Complete the application on screen

For supporting documents and postal application forms:

• Print it out
• Post to:
• Charities, Savings and international 2

HM Revenue and Customs BX9 1BU

Any Questions on CASCs?

Payroll Giving

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What is Payroll Giving?

• Has been around since 1987
• Employee agrees to have donations deducted from Gross salary by Employer
• Employer sends all payments to a Payroll Giving Agency
• Payroll Giving agency then distributes payments to the nominated charities

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What is Payroll Giving?

• Employee that pays Basic Rate Tax of 20% gives £10 from Gross Salary
• £2 Income Tax is not charged on the donation
• Net cost of the donation to the employee is £8
• Treasury has just started a consultation process to find ways of improving the

use of Payroll Giving that ends on 19 April

Any questions on Payroll giving?

Value Added Tax (VAT)

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VAT and Charities

• There is no blanket exception from VAT for Charities.
• They are generally subject to the same VAT rules as other organisations &

pay VAT in the UK on sales and purchases just like anyone else.

• Charities must register for VAT if their taxable sales of goods & services

exceed the prevailing VAT threshold - currently £83,000 p.a.

• Certain goods and services are zero-rated or reduced-rated when purchased

by charities – otherwise known as ‘VAT reliefs’.

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VAT and Charities

Sales / Income Non-business activity – no consideration for a supply. Commonly referred to as “outside the scope”. Examples include:

• Drop in centres
• Free admission
• Rescue services; and
• Helplines

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Charitable activity

Charitable activities can be ‘business activities’ for VAT purposes Business activity – A consideration is received in return for a supply Business supplies can potentially fall within the scope of VAT BUT If charity is not registered for VAT then no need to charge VAT

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VAT liability of business supplies

Business supplies could be:

• Taxable at standard rate – 20%
• Taxable at reduced rate – 5%
• Taxable at zero rate – 0% or
• Exempt from VAT.
• Common examples of exempt activities:
• Welfare
• Education and training
• Sports
• Fundraising events.

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Common charity activities and their VAT treatment

Charity shops and selling goods;

• Sales of donated goods = zero-rated.
• Sales of bought in goods = standard-rated (unless zero-rated books).
• If a charity charges donors to sell their donated goods = standard-rated.
• If a charity makes no charge to sell donated goods = non-business.
• A VAT-registered charity can claim back VAT on direct costs incurred.

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VAT registered charities – claiming VAT on costs

The partial exemption rules:

• You can claim ALL input tax directly attributable to taxable supplies
• You can claim NO input tax directly attributable to exempt supplies
• A mixture of both – partial exemption calculation required to determine the

percentage of residual input tax claimable.

• VAT Notice 706

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Will the change lead to the charity needing to register for VAT?

• Yes, if the value of their total taxable supplies reaches the threshold. At

present £83,000 per annum

• Charities can register voluntarily at anytime providing they are making

supplies which would be taxable

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What are the benefits of registration?

• The Charity can reclaim any VAT it incurs in making taxable supplies

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A change in activity – common charity activities and their VAT treatment

Admission to premises;

• If this is free, but a donation is requested, no VAT is payable
• If there is a set admission fee, VAT is payable
• If a minimum donation is requested and admission is not allowed unless this

is paid, VAT would be payable

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A change in activity – common charity activities and their VAT treatment

Advertising services;

• Sale of advertising space in own publications or website = VAT payable
• Sale of advertising space to another charity = zero-rated
• Key thing to remember – advert must be using someone else’s time or space

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A change in activity – common charity activities and their VAT treatment

Fund-raising events that qualify for exemption;

• The event must be promoted as raising funds for the charity
• Must be held in UK; and
• Must not be a series of more than 15 of same type in same location.
• Exemption is available to charities and their wholly owned trading subsidiary.

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VAT reliefs available for Charities

Does a charity have to be registered for VAT to benefit from reliefs? No, BUT; Recognition as a charity for tax purposes is essential to claim reliefs. www.GOV.uk >search ‘Charities and tax’ > ‘Get recognition for tax purposes’

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VAT reliefs available for Charities

• Construction of buildings to be used for ‘Relevant Charitable Purpose’ (RCP)
• r ‘Relevant Residential Purpose’ (RRP) – not subject to charitable status.
• Advertising services and goods connected with collecting donations
• Charity funded medical, veterinary, scientific & rescue equipment and

ambulances

• Certain aids to be made available to disabled people

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VAT reliefs available for Charities Changes to accommodation

Construction services

• Constructing a new building
• Changing an existing building
• Disapplication of a Landlord’s option to tax

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VAT reliefs available to Charities

• more common ones
• Advertising and goods connected with claiming donations
• Aids for the disabled
• Medical & scientific equipment

Eligibility declaration is provided to supplier to request zero-rating.

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VAT reliefs available – more obscure

• Medicinal products and substances
• Drugs and chemicals for medical & veterinary research
• Lifeboats, slipways & launching equipment, including fuel
• Rescue equipment
• Resuscitation training models

VAT Notice 701/1– Charities – available from WWW.GOV.UK

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VAT reliefs available for the disabled & older people

• Vehicles substantially and permanently adapted for wheelchair users
• Equipment and appliances “designed solely” for use by a disabled person
• Grab rails, ramps, stair/bath seats
• Disabled people give an eligibility declaration to the supplier

VAT Notice 701/7 – Disabled Reliefs - available from WWW.GOV.UK

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