Most of us these days will have heard of Gift Aid, but how many of  us really understand just how beneficial it is to charities that we make sure we tick the Gift Aid box for any donations we may make?

According to National Statistics donations to charities for 2009/2010  could amount to an estimated £4.5 billion,  out of that just over  £1 billion pounds in tax is expected to be repaid to Charities – that’s as long as the donor ticked the Gift Aid box to enable the charity to make the claim for Gift Aid.

Originally set up in 1990, Gift Aid allows tax-effective giving by individuals to Charities in the United Kingdom.  The donor fills out a gift aid form when the goods are delivered or collected and the charity claims back the tax – simple! Plus, wholly owned trading companies of charities are able to shed their profits back to the charity using the Gift Aid scheme – more tax savings directly benefitting the charity.

There are other ways charities can  benefit from various tax breaks in respect of its charitable activities. Don’t forget that charity events, including fund-raisers, are exempt from VAT.  This means that proceeds, including admission fees, will not attract a charge to VAT – great news for seasonal events and Children In Need!

In addition, the sale of donated goods does not incur a charge to VAT.  This is great news for charities and donors alike, as the full amount received will benefit the charity without having to account for VAT, even where the charity is registered for VAT (which many are).