Which option describes Gift Aid for donations?

• A. A tax relief on donations.
• B. A grant from government for operations.
• C. Insurance coverage for donations.
• D. A penalty for late reporting.

Answer: (A)

Gift Aid is a tax relief mechanism that boosts donations to charities by reclaiming basic-rate tax from HMRC. When a donor signs a Gift Aid declaration, the charity can reclaim tax on the donation, so the charity receives more than the cash given. For the donor, it doesn’t cost extra beyond paying enough tax; higher-rate taxpayers can also claim additional relief. This makes the description of Gift Aid as a tax relief on donations the best fit. It’s not a government grant for operations, not insurance coverage for donations, and not a penalty for late reporting.