Gift Aid is a UK tax incentive that enables tax-effective giving by individuals to charities in the United Kingdom.
This threshold was successively reduced in April 2000 when the policy was substantially revised and the minimum donation limit removed entirely.
A similar policy applies to charitable donations by companies that are subject to the UK corporation tax.
However, since 2006, HMRC compliant systems have been introduced to allow tax on the income earned by charity shops, acting as an agent for a donor, to be reclaimed.
In order for the charity to operate effectively they will need HMRC-approved systems to be able to record and track the progress of each item from receipt to sale and confirm with the donor that the donation should still go ahead.
[2] The Finance Act 2010 extended Gift Aid to charities within European Economic Area member states, rather than those just inside the UK.
Any cash donations that the taxpayer makes to the charity after making a declaration are treated as being made after deduction of income tax at the basic rate (20% in 2011), and the charity can reclaim the basic rate income tax paid on the gift from HMRC.
[6] To promote the Gift Aid incentive (amongst other activities), the UK Government created "The Giving Campaign" in June 2001.