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Voluntary Support North Surrey

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Registered charity No. 1141587

A company limited by guarantee No. 752663

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Gift Aid - What is it?

Gift Aid allows UK charities to claim back the basic rate tax already paid on donations by the donor.

This means they can claim back from the government on your behalf 25p for every £1 donated, boosting the value of the donation by a quarter.

How does Gift Aid work?

When a UK taxpayer gives a gift of money to a charity, tax has already been paid on that money. Because voluntary organisations are exempt from tax, you can claim this money back from HM Revenue & Customs (HMRC).

How is Gift Aid calculated?

Under HMRC’s Gift Aid scheme, charities can reclaim an amount equal to basic rate tax (20%) on the amount of the donation, plus basic rate tax already paid by that taxpayer on that donation. For a £100 donation, the fraction applied to calculate Gift Aid is 100 x 20/80, which is 25% of £100 which equals £25. This means that the charity receives £125 for a £100 donation.

Why are some donations not eligible for Gift Aid?

Donations from non-UK taxpayers are not eligible for Gift Aid and HMRC regulations also mean that Gift Aid can’t be reclaimed on a donation if:

the donation was on behalf of someone else or a group of people

the donation was on behalf of a company

the donation was to a family member or friend doing an event where the charity is contributing to their costs

the donation was made in return for goods, rights or services.

Someone made a mistake when making their donation and Gift Aid hasn’t been claimed – what can I do?

Once a donation has been made it isn’t possible to adjust the Gift Aid on it, it must be refunded and the donation made again.

How do you get recognition from HMRC for your charity?

You must register your charity’s details with HM Revenue and Customs (HMRC) to get tax back on things like Gift Aid donations, using the Government Gateway

To register have the following charity information at hand:

bank account details and financial accounts

trustees details including dates of birth and National Insurance numbers

registered charity number

charitable purposes of your organisation

your charity’s constitution (governing document)

Originally, declarations had to be made in writing but they can now be made orally, although the charity must confirm the declaration in writing and keep a copy of the confirmation.

Social Impact Bonds and How They Work

In most public service payment-by-results contracts, a charity must use its own money to roll out the programme, hoping that it will achieve good enough results payments to cover the costs. A Social Impact Bond (SIB) takes away the financial risk from both the government, which commissions the programme, and the charity delivering the service, because social investors (the likes of Big Society Capital) step in to cover the costs up-front.

SIBs were designed to help reform public service delivery, improving the social outcomes of publicly funded services by making funding conditional on achieving results. Investors pay for the project at the start, and then receive payments based on the results achieved by the project when the measured outcomes are achieved.

To secure a SIB for your project you must first of all outline your project running costs and targets. The next step is to team up with a specialist go-between such as Social Finance and put together a bid to attract investors. The bid is then submitted to the commissioner (the government in the case of The Life Chances Fund) who decides whether to award the contract. Usually the projects are assessed at regular intervals (monthly) and payments on results made accordingly.

If you are considering a SIB you must have very good performance management processes in place and be absolutely sure you can deliver the outcomes otherwise a SIB is probably not a suitable funding method for your organisation.

Your outcomes should:

be measured easily and accurately

be linked directly to an intervention

save money, either by directly reducing costs or by avoiding future cost

some of the money saved is cashable or highly socially beneficial

Benefits of the SIB are that they encourage new ideas for projects that tackle difficult problems and provide funding for prevention and early intervention services that would have difficulty securing funding. The SIB also ensures that evaluation of project outcomes is regular and accurately highlights what is working in the project and what is not. The expectation for the future is that government will be funding cost effective programs that ‘work’ and attract new forms of capital to the social, educational and healthcare sectors.

To find out more read the government introduction to SIBs by clicking here.

SPOC = Single Point of Contact

A decline in grant funding and the trend towards bigger and bigger contracts are making things tougher than ever for small charities. Public sector grants have been replaced in most instances with contracts, often with complex commissioning processes making it very challenging for smaller charities to bid for and operate contracts. This means that funding is falling faster for small charities than for bigger ones which is unfortunate because smaller, more personalised services provided by smaller organisations are more cost effective, provide better outcomes and are more popular with the service users.

The vast majority of voluntary organisations are small. According to the Charity Commission there were 166,311 registered charities in the UK in September 2016 and less than 7%, just 11,079, had income of over £500K. Research shows that funding from local and central government for small and medium sized charities fell by 44 per cent between 2008/09 and 2012/13.

There is now a growing interest in making sure that public service delivery involves smaller organisations and not just the bigger ones and that has given rise to the SPOC as a viable and valuable option to address the problem. The Single Point of Contact Model is a single organisation (or possibly partnership of organisations) through which a commissioner can work with a broad range of Voluntary organisations through a single grant or contract. The SPOC enables the commissioner to design services reflecting the needs of local people and communities. The SPOC works with a partnership of local organisations to deliver the work through contracted arrangements. The SPOC takes on the contract management, monitoring and administration, meaning commissioners only need manage one contract against commissioning outcomes. The SPOC is paid to performance manage the delivery organisations, allowing commissioners to focus on outcomes.

Its success comes from removing much of the competition and rivalry created by most procurement processes, and replacing it with cooperation. Charities are encouraged to work together to share intelligence and ideas. Instead of a single charity pretending to have all the answers to everyone’s problems, the SPOC model encourages charities to provide different elements of the support an individual may need, according to their own expertise. They can do this safe in the knowledge that they are not jeopardising their prospects of getting future funding by giving away valuable intelligence.

Everywhere this model is in operation, it is a success. In South Yorkshire, for example, Voluntary Action Rotherham act as a SPOC, allowing around 20 smaller charities to provide services local people need. It is also the model that the Big Lottery Fund is using for its multi-million pound Fulfilling Lives programmes.

Read the full report here