Handling Gift Aid overclaims and refunds (UK only)
Having processed eligible donations in a Gift Aid claim in the Giving module, it sometimes happens that subsequent changes happen or a mistake is identified that gives rise to an overclaim of Gift Aid requiring a refund due to HMRC. In this article, we explain how to correct issues with previously claimed donations and get things right for the giver(s) and your Gift Aid claims and donation records.
In this article
What can cause an overclaim?
Guide to donation statuses in the Giving module
Reversing claimed donations and/or refunding the Gift Aid
Processing a manual claim with HMRC
Submitting an automatic Gift Aid claim with overclaim refunds
As long as a Gift Aid claim has not been submitted to HMRC, the claim can be rolled back to an 'editable' status (or deleted), so that donations within that claim can be further edited if needed. Donations that are not claimable and not yet 'claimed' can always be edited. However, once a claim status is submitted (or the claim's status changes to Complete or Submitted), the donations in that claim are locked and no further changes can be made to the donation or Gift Aid amounts (although the fund, donation date, donation method and donation notes can still be edited for any donation). The only action available is to process an overclaim and optionally reverse donations in error before re-posting them correctly.
What can cause an overclaim?
1. The giver isn't expecting to pay sufficient tax
Having processed and claimed Gift Aid on a giver's donations, it sometimes happens (especially with self-employed people) that they come back to you after the donation and tell you they aren't paying sufficient income tax and so they no longer want Gift Aid reclaimed on their donations - in effect, cancelling their Gift Aid declaration. However, they may also request that you return some or part of the Gift Aid reclaimed on donations already processed and claimed back from HMRC. While it is 'legally' the giver's responsibility to repay Gift Aid where insufficient tax has been paid, many organisations are happy to process an overclaim and offset the overclaimed Gift Aid due against their next Gift Aid claim. This is a perfectly acceptable practice. In this scenario you will need to cancel their Gift Aid declaration by adding an end date so that subsequently claimed donations get flagged as "overclaimed" - the Gift Aid on those donations can then be refunded as explained below.
2. The donation amount is reduced after the Gift Aid claim is submitted
Another cause of overclaims is if, after having submitted a Gift Aid claim, you subsequently discover a mistake when reconciling your accounts or at the end of year audit/examination. Once donations have been included in a Gift Aid claim they are locked and no further changes to the donation amount can be made. In the scenario where the claimed donation amount needs to be reduced - e.g. a donation of £50 was posted and claimed as £500 in error - in this scenario, you will need to reverse the donation and refund the Gift Aid, and then re-post a new donation for the correct amount and claim accordingly. See below for how to do that.
3. The donation amount is increased after the Gift Aid claim is submitted
It is not possible to edit the amount of previously claimed donations. In the scenario where the donation amount needs to be increased - e.g. a donation of £500 was posted and claimed as £50 - you can post a new donation for the additional amount, perhaps adding a note against the donation to indicate the reasons, for audit trail purposes. This additional donation can then be included in your next Gift Aid claim.
4. The Gift Aid 'split' for a couple is changed after the Gift Aid claim is submitted
If the Gift Aid 'split' for a giver changes after the donation has been claimed then this too may give rise to an overclaim. For example, if the Gift Aid split was originally set so that 100% of Gift Aid applied to the giver in question, but now the donation split needs amending to 50%/50% between the giver and their spouse, an overclaim will arise if the spouse does not have a valid Gift Aid declaration. In this scenario, you will need to reverse the donation and refund the Gift Aid and then re-post a new donation, with the correct couple split %, and claim accordingly on the new donation. See below for how to do that. If the spouse giver can provide a valid Gift Aid declaration then a change in split will not result in an overclaim refund
Guide to donation "Gift Aid Statuses" in the Giving module
Note: A donation's Gift Aid status (explained below) is not to be confused with the Gift Aid Claim status, which progresses from Unclaimed to Reviewed to Complete (or Submitted if submitted online to HMRC through ChurchSuite). Here are the donation Gift Aid statuses you may see in your Giving module
- Not Claimable - a valid Gift Aid declaration covering the donation is not held for the giver. This donation is fully editable. Donations will not be included in Gift Aid claims.
- Unclaimed - a valid Gift Aid declaration is held for the giver covering the donation but the donation has not yet been included in a Gift Aid claim. This donation is fully editable.
- Override - the Gift Aid declaration 'auto-detect' has been overridden so that Gift Aid is set to not be claimed for this individual donation, irrespective of a valid Gift Aid declaration being held. This donation will not be included in a Gift Aid claim. This donation is fully editable.
- Claim pending - A valid Gift Aid declaration covering the donation is held for the giver and the donation has now been included in a Gift Aid claim that has not yet been submitted. Some donation fields are still editable, but the 'date' and 'amount' fields are locked. Once the claim has passed the "Review" stage, the donation's Gift Aid status will change from Claim pending to Claimed. Clicking on the donation status will redirect you to the claim where the donation is included.
- Claimed - The donation has been included in a Gift Aid claim. The donation is locked and the 'date' and 'amount' cannot be edited. The donation 'method', 'fund' and 'notes' can be edited. You have the option to "Refund Gift Aid" and choose between refunding the Gift Aid only and/or reversing the donation too. Clicking on the donation status will redirect you to the claim where the donation is included.
- Overclaimed - The donation has previously been included in a Gift Aid claim but the giver's circumstances have changed and there is now no longer a valid Gift Aid declaration covering the donation, giving rise to a refund of Gift Aid being necessary. Only the donation date, fund, giving method and notes can be changed. Clicking on the donation status will redirect you to the claim where the donation is included.
- Overclaimed & Refund Pending - A Gift Aid refund has been recorded against an overclaimed donation but the refund has not yet been included in a Gift Aid claim (which will offset the refund against the claim). Only the donation date, fund, giving method and notes can be changed. The Gift Aid refund can still be cancelled at this stage. Once the claim has been reviewed and the claim status changes to "Reviewed", no further changes to the donation refund are possible. Clicking on the donation status will redirect you to the claim where the donation is included.
- Overclaimed & Refunded - the previously overclaimed Gift Aid on this donation has been included and refunded in a Gift Aid claim that has either been reviewed, finished, completed or submitted. Since the claim is locked, no further changes to the donation are possible unless the claim status is rolled back. Note that the Gift Aid refund can still be cancelled if the claim status is "Reviewed" but the claim must first be rolled back to "Unclaimed" - the donation status will then revert to "Overclaimed and Refund Pending". The refund is locked when the claim status changes from "Reviewed" to "Submitted" or "Completed". Only the donation date, fund, giving method and notes can now be changed. Clicking on the donation status will redirect you to the claim where the donation or the refund is included.
- Claimed & Refunded - the previously claimed Gift Aid on this donation has been included and refunded in a Gift Aid claim that has either been reviewed, finished, completed or submitted. Since the claim is locked, no further changes to the donation are possible unless the claim status is rolled back. Note that the Gift Aid refund can still be cancelled if the claim status is "Reviewed" but the claim must first be rolled back to "Unclaimed" - the donation status will then revert to "Overclaimed and Refund Pending". The refund is locked when the claim status changes from "Reviewed" to "Submitted" or "Completed". Only the donation date, fund, giving method and notes can now be changed. Clicking on the donation status will redirect you to the claim where the donation or the refund is included.
Reversing claimed donations and/or refunding the Gift Aid
There are two ways to change a claimed donation so that overclaimed Gift Aid can be refunded to HMRC - the method you choose is dependent upon whether the giver's Gift Aid declaration is to remain active so that future donations are still claimable (see 1 below) or whether you are correcting an error and need to reverse the donation too (see 2 below).
1. Adding an end date to a Gift Aid declaration
If future donations are no longer claimable, you can Edit the giver's Gift Aid declaration and enter an End date within the giver's profile page. In this method, a new Gift Aid declaration will be required if future donations are to be claimable. The declaration status will change from Active to Expired.
Adding a declaration End date will cause all previously-claimed donations after the end date to show as Overclaimed and any donations added in the future will show Not claimable (until a new valid declaration is added). To process a Gift Aid refund select Refund Gift Aid from the donation Actions...
On the Refund Gift Aid pop-up, you can choose Refund Gift Aid. In this example, the original donation amount will be left intact and remain against the giver's profile and continue to show on the giver's statement of donations and in My Giving - only the Gift Aid is affected and an overclaim refund will be included in your next Gift Aid claim.
The donation status changes to Overclaimed and Refund pending. Repeat for each Overclaimed donation. The option to Undo Gift Aid refund is available until the refund has been included in a claim.
The donation status will further change to Not Claimable and Refunded when the next Gift Aid claim is processed - refunds will be included in that claim (be sure to select the Include refunds option when starting the claim).
2. Correcting errors
In addition to refunding overclaimed Gift Aid (as seen above), there is also the option to reverse the donation too. This is necessary when the donation amount has been wrongly entered and needs to be reduced, where a donation has been claimed against the incorrect giver, or where there has been a change in a couple's Gift Aid split %. A reversed donation will continue to show in your Giving module (in strikethrough on the giver's profile), so your reports will continue to show the full audit trail. A reversed donation is however excluded from and invisible to the giver in their statement of donations and the My Giving section of My ChurchSuite.
Reversing a claimed donation is done from within the giver's profile page. The option to Refund Gift Aid is only available for claimed or overclaimed donations - remember, unclaimed donations can always be edited. To process a refund of Gift Aid and reverse a claimed donation, select Refund Gift Aid from the Action menu of the donation in the list.
On the Refund Gift Aid pop-up, select whether you wish to Refund the Gift Aid (leaving the donation against the giver profile unaffected) or to Refund Gift Aid and Reverse the donation (which will show the reversed donation in strikethrough). Select Refund Gift Aid & reverse donation to process the refund and reverse the donation.
In this example, the donation has been reversed too. The donation status has changed to indicate the donation has been Reversed and that the Overclaimed Gift Aid has a refund pending, which will be included in the next Gift Aid claim as an offset of the amount being claimed from HMRC. Notice the donation amount is shown in strikethrough. The reversed donation will continue to show on the giver's profile in the Giving module and all reports but will be excluded from any statements of donation and My Giving (i.e. the giver will no longer see that donation).
Once you have completed your next Gift Aid claim, including any refunds within the claim, the reversed donation status will update to Reversed, Claimed and Refunded.
Note also how, for a claimed donation where the Gift Aid only has been refunded, you can still subsequently select Reverse donation if you need to.
What do givers see?
While the Giving module Users see the full audit trail and donation status of "Claimed and Refunded", your givers will see the correct Gift Aid on their Statement of Donations and when viewing their donation history in My Giving within the member-facing My ChurchSuite. This means that if any overclaimed donations have been refunded, the Gift Aid amount against those donations will show as zero (i.e. as if no Gift Aid were ever claimed). Reversed donations are also not shown on Statements of Donations or in My Giving.
The remainder of this article describes how overclaim refunds are handled within that Gift Aid claim process.
Processing a manual Gift Aid claim with overclaimed refunds
If your organisation produces Gift Aid claims and uploads them manually through the HMRC online portal (rather than through ChurchSuite), you can use HMRC's online form to indicate that an overclaim has occurred and that an overpayment of Gift Aid has been made to your organisation and now needs to be refunded. Further explanation and the form can be found on HMRC's website here.
Having added a claim and finished the review process, you now have the option to Download claim CSV. The CSV file contains all the information that you will copy and paste into the HMRC spreadsheet for submission. Where a claim includes overclaimed refunds, a warning message is displayed when downloading the claim CSV file - this message reminds you of the total refunds amount in respect of overclaims that need to be manually entered into the appropriate box in the HMRC spreadsheet before submission.
Note that refunds for overclaimed donations in previous tax years can (and will be) included when previewing and submitting your claim - it is not necessary to keep refunds to just those claims within the tax year in which they arise.
Submitting an automatic Gift Aid claim with overclaim refunds
For organisations using ChurchSuite's Submit to HMRC functionality to upload their claim online from within the Giving module, processing refunds is considerably easier. The online submission includes full details of the Gift Aid claim and any overclaim refunds. HMRC will then refund you the "net of refunds" amount of Gift Aid. Negative net claims are permitted - HMRC will deduct any net amount owing from your next Gift Aid claim. Note also that refunds for overclaimed donations from previous tax years will be included when previewing and submitting your claim - it is not necessary to keep refunds to just those claims within the tax year in which they arise.
When preparing a Gift Aid claim, you have the option to Include refunds relating to overclaims in the claim you submit to HMRC within ChurchSuite's Giving module.
The previewed claim lists all Donations and Refunds, ready for your review.
Once you are happy, click Save and follow the remainder of the process to download or submit the claim - see the related support article for further information about submitting Gift Aid claims.