Charities and tax

If you help to run a charity you need to keep on top of the tax and audit regulations that apply to charities, and the gift aid scheme.

A person with earnings or pension income of less than £10,600 and interest of up to £5,000 will pay no income tax in 2015/16. These individuals should not make gift aid declarations for donations made on or after 6 April 2015, as they do not pay the income tax which the charity reclaims in respect of that donation.

As a charity you can reclaim tax online which has been deducted from bank interest, or is due back under the gift aid scheme or gift aid small donations scheme (GASDA). The charity needs to register with HMRC’s online services and opt to use the Charities Online service. Details of the donations it receives can be reported on a spreadsheet for up to 1,000 donations at a time. HMRC provide example spreadsheets to help with this process.

Charities generally have to have their accounts audited, which can be a costly undertaking. To allow charities to spend more of their income on their charitable aims the Government has raised the threshold above which an audit is required to £1 million of income per year, for accounting periods that end on or after 31 March 2015. The charity can opt to have a less costly independent examination of its accounts carried out in place of a full audit, to reassure the charity’s trustees that all is well financially.

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