Help for the smallest

From April 2013, charities receiving small donations of £10 or less will be able to apply for a gift aid repayment without the need to obtain gift aid declarations from each donor. This scheme is capped to donations totalling £5,000 per annum per charity and charities will need to be recognised by HMRC as having a successful three-year track record of good tax compliance. Further details will be consulted on over the summer. This is a welcome simplification, but it remains to be seen whether the red tape requirements will negate the benefits for most charities.

Help for the biggest

Under current rules, if an individual or company donates more than £10,000 to a charity, the benefit which they can receive from the charity (while preserving tax relief on the donation) is capped at £500.

From April 2011, for individuals and corporate donors, this benefit limit will increase to the smaller of £2,500 or 5% of the donation. We are also promised new guidelines to help clarify what constitutes a 'benefit'.

It is felt that the majority of charities and donors will be unaffected by these changes. However, this change will be particularly beneficial for charities who like to be able to give a 'thank you' of sufficient worth, be it in membership or complimentary tickets, to recognise gifts made by large donors. So a donation of £50,000 could be reciprocated with a benefit worth £2,500 from the charity.

Help to simplify self-assessment

Since 2005 taxpayers completing selfassessment tax returns have been able to direct that a tax repayment may be made to a specific charity of their choice. Such amounts can also qualify for gift aid.

The amount donated to charity by this system is rather low at £400,000 per annum. Indeed, it seems to have cost HMRC approximately £150,000 per annum to operate the system, so the cost-benefit ratio is difficult to justify. There is a further issue in that the system is vulnerable to fraud. The scheme will therefore cease for repayments made after 6 April 2012.

In place of this system, HMRC will utilise the available resources to introduce:

  • an online claims system for charities to register their details for gift aid and to make gift aid claims. As a first step, HMRC intends to publish four 'intelligent' forms, containing automatic checks to improve the accuracy of completion
  • a supporting electronic gift aid database for gift aid declarations.

Help to be consulted on

The Chancellor announced that over the summer consultations would take place on various measures to encourage charitable giving. These include:

  • reducing the rate of inheritance tax (IHT) from 40% to 36% where someone dies after 5 April 2012 and leaves 10% or more of their wealth to charity (after deducting IHT exemptions, reliefs and the nilrate band)
  • a proposal to encourage donations of pre-eminent works of art or historical objects to the nation in return for a tax reduction. We will await these consultations with great interest in the coming months.

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