I belatedly clocked a Linkedin reminder from top tax expert and RSM Partner Andrew Robinson that Thursday 6 October was Gift Aid Awareness Day (the irony of only realising this today, 7 October, is not lost on me!). Andrew reminded us that the simple act by a UK taxpayer of making any charitable donation via Gift Aid increases the amount received by the charity by 25% and it can also benefit higher-rate UK income taxpayers too.
As Lizzie Ellis of the Institute of Fundraising explains in her excellent blog (quoted below), it's the best way for donors to make their donations go even further. So simple yet so important for the charities that we increasingly rely on to meet the basic needs of many people across the UK.
Gift Aid isn't just for individuals, however. Charities that would otherwise pay tax on non-charitable trading income that they generate (or for example receive by way of profit share from a joint venture) can often mitigate this by routing those activities through non-charitable trading subsidiaries. These subsidiaries can achieve a similar effect to Gift Aid by making a qualifying charitable donation (to give it its proper name) equal to their otherwise-taxable profits, to the parent charity. In doing so the subsidiary can potentially reduce or even eliminate its taxable profits altogether. Of course, it is quite a bit more complicated than that, and you should always take appropriate tax advice from someone like Andrew before implementing any steps to mitigate a tax bill. Still, the principle remains that charities can derive significant tax savings by structuring the delivery of their non-charitable trading activities carefully.
Over the years, we at ACS (working closely with tax advisers) have supported lots of charities, especially in the housing sector, to deliver diversified income-generating activities - often development-related ones - through judicious use of subsidiaries and Gift Aid (qualifying charitable donations). They can be immensely effective to secure the maximum return for the charity when in this day and age, even small savings make a difference.
We can all see the hard times ahead of us and the growing need for charities and housing associations to step in and support vulnerable customers out of their limited resources. If nothing else, Gift Aid (and qualifying charitable donations) give charities permission to pick the pocket of the Government and apply the money where it will be most effective - on the ground, through direct interventions.
If you have a tax-efficient delivery structure already, you might want to check under the bonnet to make sure you are using it properly and getting the maximum benefit from it (you may be surprised). If you haven't thought about it until now, there's no better time to take some advice about whether you can do things differently and better.
If you'd like to talk about what kind of efficiency health check your organisation could benefit from, drop me an email at victoria.jardine@anthonycollins.com.