UK: Gift Aid Developments

Last Updated: 15 April 2013
Article by Martin Griffiths

April 2013 sees the introduction of a number of significant reforms for Gift Aid. Whilst they all purport to be beneficial for charities, there are numerous areas in the detail which charities must be mindful of.

Charities Online: Short term pain, long term gain?

From 22 April 2013, charities will be able to submit their Gift Aid claim via the new HMRC system, “Charities Online”. By the end of the transitional implementation at the end of September 2013, all charities will be expected to submit their Gift Aid claims online.

The new system has many positive features and it is generally expected that online claims will speed up the process and save on postal costs. In addition, due to the nature of the system, if any information on a Gift Aid claim is incorrectly completed, this will automatically be flagged and the claim will not be able to proceed. This is preferable to having claims delayed to allow errors to be corrected and reduces the risk that HMRC will raise retrospective enquiries into Gift Aid claims.

There is of course a downside, at least in the short term. Charities will have to move their own databases into the HMRC online model, which will inevitably be a significant administrative burden. Since this must be done by the end of September, charities are advised as soon as possible to direct the appropriate resources to dealing with the requirements.

In addition, the new standard Gift Aid claim procedure requires some information that was not required before, such as the postcode of donors. Charities are therefore advised to review their records and contact donors as soon as possible if they need to acquire any further information. There is understandable concern in the sector at how this may effect the level of donation.

Thus while the ultimate aims of the Charities Online system are to be commended, charities may face a short term upheaval in making sure their systems and records are equipped to cope.

Gift Aid Small Donations Scheme (“GASDS”)

From April 2013 charities receiving small donations of £20 or less will be able to submit gift aid claims without obtaining gift aid declarations for those gifts. This is of particular interest for those charities who operate cash collection boxes where gifts are often made in passing or as a “spur of the moment” decision.

Whilst GASDS is certainly to be welcomed, charities must be aware of a number of conditions which must be met to benefit from the scheme:

  • Gift aid can be claimed under GASDS in respect of a maximum of £5,000 worth of gifts per year.

  • Charities must claim £1 under “normal” Gift Aid for every £10 claimed under GASDS.

  • The charity must have been in existence for at least three years.

  • The charity must have made at least two valid Gift Aid claims in the previous four tax years.

For larger charities who rely to a great extent on cash box donations it may be disappointing that the upper limit of GASDS is set at £5,000. However GASDS is undoubtedly a step in the right direction and it may not be too optimistic to hope that the limits may be pushed upwards if uptake for GASDS is high.

Gift Aid on goods donated to charity shops

Also from April 2013 rules have been announced to lift the administrative burden for charities claiming Gift Aid on the proceeds of sale of goods donated to charity shops.

Currently when charity shops sell donated goods, they must contact the donor for consent to retain the proceeds of sale (as officially the shop is only selling as the donor’s agent) and request a Gift Aid declaration in respect of sold items. The rules are to be relaxed so that the donor will only need to make a single declaration upon the donation of the goods.

The new treatment will apply where the total amount of sale proceeds for goods donated by a single individual does not exceed £100 where the goods are sold by a charity operating a shop directly, and £1,000 where the goods are sold by a trading subsidiary.

To the extent that the total sale proceeds for any one individual donor is above these limits, the charity will still need to contact the donor to seek authorisation. HMRC promised at the end of 2012 that guidance on the new procedures would follow in the New Year. However this is yet to materialise. Therefore whilst again the change is certainly positive, charities would be wise to await further announcements from HMRC to confirm how the policy will operate, before changing their own internal procedures.

New Gift Aid Declarations

HMRC have recently published new model Gift Aid declarations. HMRC have not made it absolutely clear whether the new declarations are merely guidance or formal requirements. The best interpretation is that they are guidance, but that if declarations are not completed in accordance with the “guidance”, there is a possibility that HMRC could reject certain Gift Aid claims.

The best course of action would therefore be to adopt the new standard Gift Aid declarations. The new form includes a statement, in addition to that concerning the donor being a UK taxpayer, that “I understand that other taxes such as VAT and council tax do not qualify” [for determining whether I am a UK taxpayer]. This wording does not appear to add much to understanding and may only serve to confuse donors.

Concerns have been raised with HMRC about the new declaration and we will publicise any further developments. For now the new Gift Aid declaration can be found at the following web address:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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