Charities can benefit from their tax exempt status to receive donations and legacies free of tax or to reclaim tax that has been paid on the money donated. The main form of tax effective giving is Gift Aid which can apply to any amount and can apply to regular giving as well as one-off donations.
When an individual gives money to charity under Gift Aid, the charity can reclaim the amount equivalent to the basic rate of tax. Gift Aid can only apply to cash donations and not to in-kind gifts. The charity must obtain a declaration from individuals that they wish the charity to treat their donation as Gift Aid. To claim Gift Aid charitable organisations need to register with HM Revenue and Customs. It is not claimable on company donations as the company has already declared the gift before tax is deducted.
For more information on tax effective giving see our overview on Taxation.
