How does the retail gift aid scheme work?

Gift Aid rules do not allow Gift Aid to be claimed on donated goods, only on monetary donations, which are grossed up by 25%. To convert a donation of goods into a monetary donation, donors have to retain ownership of their goods until sold so the proceeds from their sale belong to the donor. The donor can then donate those proceeds to the charity under Gift Aid. Under the Retail Gift Aid Scheme, which is a concession from HMRC, the charity or its trading subsidiary sell the goods as agent of the owner. When the goods are sold, the owner is notified of the sales proceeds, giving them the opportunity to claim them within 21 days, or they have pre-agreed to donate sales up to a specified amount.

The donor must, as with conventional Gift Aid, have provided a Gift Aid Declaration to the charity in order for the scheme to apply. In addition, HMRC have rules about the operation of the scheme which charity shops must follow.

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Helen Elliott

Partner

Ross Palmer

Senior Tax Manager

Gillian McKay

Senior Tax Manager

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