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Charitable gifts can be made in four ways:
Under deed of covenant.
Under the Gift Aid (including Millennium Gift Aid) scheme.
Under the payroll giving scheme.
Ad-hoc donations.
A deed of covenant is basically an agreement to pay a fixed amount for a fixed period of time. To qualify as a tax deduction, the beneficiary must be a charity and the deed must run for at least four years. There is no minimum amount set for the payments. The payments are made net and the gross deduction is given with tax retained added back.
From 6/4/2000 onwards covenants are replaced by the gift aid scheme. Existing covenants will run to their term (four years). New donations must be covered by a simpler gift aid declaration.
From 6/4/2000 onwards the lower limit for gift aid has been removed. The taxpayer needs to make a single declaration to cover the gift and all future gifts to the charity. The payments are made net and the gross deduction is given with tax retained added back.
Prior to 2000-01 the Gift Aid scheme allows payments of at least £250 (net) obtain tax relief. The payment must be to a charity and the individual must not receive any substantial benefit from the gift. A free cheap pen etc by way of a small 'thank you' is not a problem! The Millennium Gift Aid project gives relief for certain gifts of at least £100 (net) for payments made on or after 31/7/98.
Any payments made through this scheme are allowed as expenses in the employment.
Ad-hoc Donations
They do not qualify for tax relief.
