G - L


Gift Aid

The Chancellor’s budget of April 2000, inbtroduced some of the world’s most generous tax relief schemes for the third sector. Tax relief on income tax, inheritance tax and corporation tax increased significantly and provided a number of major opportunities for thirds sector fundraising.

Gift Aid is a simple scheme that enables charities and Voluntary Community Organisation’s (VCOs) to reclaim the basic rate tax on donations received from donors and supporters. The essence of Gift Aid eligibility is that donors must declare that they have paid, or will pay enough income or capital gains tax within the same financial year as the gift is made.

Using Gift Aid currently increases the value of individual gifts from tax paying donors by 28.2% as the current basic rate of income tax is 22% (Value of Gift Aid = 22/78 x 100). This means that 28.2p can be claimed for every £1 given. Donors therefore need to ensure that they have paid the tax reclaimed by the charity (£0.28 for every £1 given).

To register your organisation to reclaim Gift Aid, your charity or VCO needs to register with HM Revenue & Customsfor tax purposes, this is a very simple process:

  • Contact HM Revenue and Customs to register for tax purposes and request a reference number and registration pack. Tel: 08453 02 02 03
  • Prepare a Gift Aid declaration for your donors to record the donor’s details such as name, address and value of their gift. This also acts as formal consent allowing you to Gift Aid their donation.
  • Promote Gift Aid amongst your donors, stressing it will not cost donors anything extra to use Gift Aid.
  • Make periodic claims to HM Revenue and Customs to claim the 28.2% of the total value of the gifts.

Further information can be found on the WCVA Giving Wales website

Governance

‘Governance’ is the general term used to describe the legal, managerial and moral responsibilities arising from trusteeship. The aim of governance is to ensure that the organisation is run effectively, efficiently, within the law and in accordance with the organisation’s strategy so as to realise its objects. All trustees have governance responsibilities.

A leading writer in the field has described it as:

"The systems and processes concerned with ensuring the overall direction, supervision and accountability of the organisation." (Chris Cornforth)

Beyond compliance with the law and regulation, governance can refer to more practical day to day issues such as the way trustees work with their chief executive, staff, members, service users and other stakeholders to deliver the organisation’s purposes. It is about taking responsibility for the running of an organisation and doing everything within the law to ensure its success. Thus, it involves a multi-disciplinary approach and that is why it is so important for trustees to have a clear understanding of what governance is.

A Code of Governance and National Occupational Standards for Trustees have been developed and detailed information can be found on the Governance Hub website.

Governing document

The governing document sets out the purpose for which the organisation is established and how it is to be operated. Its form is determined by the chosen legal structure of the organisation, the most usual being:

  • Memorandum and Articles of Association if it is a company or community interest company
  • Trust Deed, Declaration of Trust or even a Will if it is a trust
  • Constitution or Rules if it is an unincorporated association, or
  • Rules if it is an industrial and provident society.

The governing document will have an Objects Clause that sets out the purposes of the organisation and parameters of its activity. Those running the organisation cannot act outside the objects, and the governing document will also contain a list of powers that are available to be utilised in delivering the objects – typically there will be a ‘catch-all’ general power that permits anything legal to be done in furtherance of the objects too. The form of the memorandum & articles, and the IPS Rules, are determined by statute.

In addition to the objects and powers clauses these documents will contain all the administrative procedures and the rules necessary to run the organisation. They will also determine the make up and administration of the governing body, as well as the parameters and of their powers and responsibilities. Provision will be included for general meetings where there is a membership, as well as terms upon which the organisation can be dissolved and its assets (if any) distributed.

Holding trustee

Those trustees who run the charity can be thought of as managing trustees - these should not be confused with Custodian or Holding trustees. A charitable company is recognised as having a distinct legal personality and can thus hold property and enter into contract in its own name. This is not the case with charitable trusts and unincorporated associations where individual trustees have to undertake these roles and transactions. Holding trustees purely serve one role, to hold title to property for and to the order of the managing trustees and in accordance with governing document. Individuals, a body corporate or the Official Custodian can act in this capacity. However, unlike Custodian Trustees (see above) they do not have to act in accordance with the Public Trustee Act 1906.

If a holding trustees commits a breach of trust by acting outside the terms of the agreement with the charity, or by acting on instructions of the charity trustees which result in a breach, the holding trustee will be liable. Thus it is imperative a holding trustee is fully aware of the purpose for which the property is being held and any conditions attached to it.

The Charity Commission usually requires that there are 3 holding trustees but there is no maximum. Holding trustees do not usually have any powers of management, although as long as the governing document does not prevent it, there is no reason why a charity trustee cannot also be a holding trustee.

Legacy Giving

A legacy gift is an item, set amount of money or percentage of a person’s estate given to charity once the person donor dies. Legacy giving is a sensitive but traditonal form of fundraising and provides a significant source of income to the sector. The two main types of legacies are:

  • Residuary bequests - this means that once family and loved ones have been provided for, the remainder or a proportion of the deceased's estate is pledged to one or more charities.
  • Pecuniary bequests - this means that the deceased pledges a specific sum of money to a particular.

Charitable legacies are tax effective as they reduce the total amount of inheritance tax due from the deceaced’s estate. Legacies are left through the donor's will or simply by a declaration to the executors with instructions as to how and to which charity a legacy is to be distributed.

The current threshold for inheritance tax is £300,000 (from 06.04.07), the threshold increases slightly each year. Any amount left as part of a deceased person’s estate over the threshold is taxable at 40% inheritance tax. Any gifts made to charity from the estate reduce the amount liable for inheritance tax and can leave the recipient of the estate better off.

Further information can be found on the WCVA Giving Wales website