Donating to charity in the festive season via Gift Aid
With the festive season beginning to be on people’s minds, now is an opportunity to reflect and think about the firm’s proposal for festive and Christmas cards and giving to local and national charities.
Does sending cards by post and electronically fit in with the firm’s ESG objectives and policies?
Is it time to rethink and make a charitable donation?
If the answer is yes, then consider making the donation under Gift Aid.
Outlined below are some of the key things you need to know if you are thinking of making charitable donations via Gift Aid.
LLPs and partnerships are able to make these donations under Gift Aid to registered charities in the UK.
Donating via Gift Aid means the charity will be able to claim funds from the UK tax authorities.
How does an LLP/partnership donate under Gift Aid?
Effectively, each partner will need to make their own Gift Aid declaration. The declaration will need to include their:
- name
- full address
- share of the donation.
Each partner will then include their share of the donation on their personal tax return and assuming that it is appropriate, claim the higher rate tax reliefs.
LLPs and partnerships will therefore need to ideally have a schedule in anticipation of any future Gift Aid payments, which can then be passed to the relevant charities.
To reduce the administrative burden, LLPs/partnerships may wish to consider whether to nominate a partner or group of partners to make all donations under Gift Aid or set up some form of charitable foundation.
Donating under Gift Aid benefits both the charities and the individual members of the LLP/partnership.
How does donating under Gift Aid work?
An example:
- if an LLP/partnership donates £8,000 to a charity under Gift Aid
- the charity can claim a further 25% of the donation from the UK tax authorities, which in this case, is £2,000
- therefore, the charity will receive £10,000 in total.
If there are 10 partners that share the donations equally, then each partner’s share is £1,000 grossed-up with a Gift Aid payment of £800.
When partners complete their tax returns the grossed-up Gift Aid is disclosed and depending on their marginal rate of tax, the higher rate relief of 20%, 25% or 40% could reduce their tax liabilities.
What tax relief can be claimed back if the partner's share is an £800 Gift Aid payment?
| Taxpayer | Marginal rate of tax | Additional Tax relief due | Reduction in tax liability | Cost of donation |
| Basic | 20% | 0% | £0 | £800 |
| Higher | 40% | 20% | £200 | £600 |
| Additional | 45% | 25% | £250 | £550 |
| Higher Plus loss of Personal Allowance | 60% | 40% | £400 | £400 |
If the partner is not a UK taxpayer or pays tax less than the amount claimed back by the charity then the partner will need to pay HMRC the difference.
If you want to understand more about Gift Aid payments as an individual, read our article ‘Making Gift Aid donations', and to find out how to take advantage of tax planning opportunities, read our article ‘Tax planning for individuals’.
For LLPs/partnerships donating to charity this festive season, consider making the payment under Gift Aid. The charity benefits and the tax burden on partners will be reduced if they pay tax at more than 20% – a win-win for both.
If you would like more information on the issues discussed in this article or to discuss your individual circumstances, get in touch with Nicky Owen or your usual Crowe contact.
