Updated guidance on the Gift Aid scheme is now available on the HMRC website. Gift Aid is a way for charities or Community Amateur Sports Clubs (CASC) to increase the value of monetary gifts from UK taxpayers by claiming back the basic rate tax paid by the donor. It can increase the value of donations by a quarter at no extra cost to the donor.

A charity can reclaim tax from HMRC on the ‘gross’ equivalent of the donation which means that for every £1 donated, the charity can claim an extra 25 pence.

In addition, HMRC will automatically pay the charity or CASC a further three pence for every pound donated to adjust to the fall in basic rate tax (from 22 per cent to 20 per cent) on Gift Aid donations made from 6 April 2008 until 5 April 2011.

If a donor is a higher rate taxpayer, they too can benefit from tax relief as they can claim back the difference between the higher rate of tax at 40 per cent and the basic rate of tax at 20 per cent on the total value of the donation-a total of 20 per cent. So if £1 was donated, the gross donation would be £1.25, so the donor could claim 25 pence back (20 per cent of £1.25).

Full details on Gift Aid and tax relief is available at http://www.hmrc.gov.uk/charities/gift_aid/basics.htm.