Maximising donations for schools

Published on 15 August 2016

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Once you form an academy trust, Kreston Reeves always recommend that you register as a charity for tax purposes after completing the charity application (CHA1) with HMRC. This registration will provide your trust with the following benefits:

  • HMRC will not request a corporation tax return every year (although some returns will be asked for once every so often as a “check”)
  • the trust will be exempt from corporation tax on the majority of income
  • the trust will be able to claim gift aid on donations to the school – allowing an increase to the value of a donation of 20% e.g. a £8 donation will become £10

This can automatically make schools think they are entitled to a large claim however, not all donations are eligible to qualify.

Only donations that are wholly voluntary in nature are eligible – simply calling a donation ‘voluntary’ does not automatically create eligibility. For example if parents/carers are asked to make a ‘voluntary contribution’ which is linked to the provision of services/facilities then this would be ineligible.

Donations must not be linked to the provision of any benefit to the donor (or student related to the donor) i.e. general fundraising for the school or for an improvement project would not be eligible if the donor receives a benefit such as advertising.

School trips are a popular area for schools to claim the additional 20%. However, the following criteria must be met:

  • they’re non-refundable even if the trip doesn’t go ahead or if their child does not go on the trip
  • any benefit (e.g. travel costs, insurance, cost of entry) does not exceed the maximum levels of allowable benefit for the donation
  • the school tells parents that the contribution is not compulsory i.e. the child can attend the trip regardless

In some instances, generous parents may pay more than the requested donation; it is the difference that will be eligible for gift aid. However, there are also some donor benefit rules to consider. The maximum value of any benefit associated with the donation cannot be in excess of:

Donation amount Max benefit value
Up to £100 25% of the donation
£100 to £1,000 £25
£1,001 and over 5% of the donation (up to £2,500)

Therefore, if the trip costs £8 per pupil and you ask for £10 donations, although the donation is in excess of the cost, the benefit (£8) exceeds 25% of the donation and so is not allowable. But, if the donor chose to donate £15, this extra £5 would be eligible for gift aid.

Other areas where academy trusts are looking to raise funds are matched funding for certain projects. There is a risk that once the fundraising is setup and donors tick the gift aid boxes, that they do receive some benefit (e.g. donate £50 receive 1 month use of sports hall facilities). If the benefit is in excess of the limits, then gift aid will not be allowable and you may have claimed incorrectly.

If this ever did arise, the good news is that the donor would have to repay HMRC if identified, not the trust. But it could be a reputational risk for the trust.

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