Tax relief statistics published on 28 June showed that charities and CASCs claimed a total of £3.79 billion in tax reliefs from 1 April 2018-31 March 2019 – of which a record £1.35 billion was Gift Aid claims. But research shows that Gift Aid is not claimed on about 25% of donations eligible for Gift Aid. Many donors think it will cost them, or the charity, more if they donate through Gift Aid; and many charities don't register for Gift Aid or encourage donors to tick the box because they worry about the admin involved. But Gift Aid increases the value of donations by 25%, so it is definitely worth it for any charity that relies on donations from individuals who pay enough UK income tax or capital gains tax to cover the amount the charity will claim on their donation.
Gift Aid declarations
Ever since Gift Aid was introduced in 1990, a donor's Gift Aid declaration only had to include their surname and the initial of their first name. In autumn 2018, HMRC said that from April 2019, all new declarations would have to include the donor's full first name, although this would not apply retrospectively. However, after discussions with the Charity Tax Group, HMRC agreed not to introduce this requirement. Instead charities and CASCs would be "strongly encouraged" to provide HMRC with full forenames whenever it is practical and possible to do so. In January 2019, CTG suggested the following steps for organisations claiming Gift Aid:
- Check what percentage of your Gift Aid records include a full forename.
- If you hold full forenames for donors include them in your Gift Aid claim.
- Try to collect full forenames in future where practical and possible to do so – inform staff, volunteers and software providers about this.
- Document any actions undertaken to improve collect of first name information.
- Provide feedback to CTG on any difficulties experienced or negative responses received from donors.
HMRC agreed that it will be sufficient for organisations to accept names that donors could reasonably be ordinarily known by, rather than needing to check whether this is the donor's legal name.
For more information see CTG's news release at http://tinyurl.com/yymnbkft.
Donations to a charity or CASC are not eligible for Gift Aid if the donor receives a benefit worth more a specified value threshold. For donations from 6 April 2019, the benefit value thresholds have been slightly simplified, by being reduced from three to two. For donations up to and including £100, the threshold remains 25% if the value of the donation. For donations over £100, the threshold is now £25 plus 5% of the excess over £100, with the maximum annual benefit remaining £2,500.
For more about donor benefits see section 3.18 in HMRC's detailed guidance for charities – the link is in the Resources section below.
Retail Gift Aid
Under the Retail Gift Aid scheme, a charity or its trading company sells donated goods on behalf of the person who donated them. When donating the goods the donor makes a Gift Aid declaration, enabling the charity shop to treat the net proceeds from the sale of the goods as a donation to the charity, on which the charity can claim Gift Aid. Until now, charity shops have had to send a letter or email at least annually to anyone who donated goods under this scheme, telling them the net proceeds from sale of the goods, and reminding the donors that they are responsible for ensuring they pay enough UK tax to cover the amount claimed.
From April 2019, charities operating the retail scheme can choose to send letters/emails only every three years, or when total net proceeds from sale of a donor's goods have reached £20 – whichever comes first.
For detailed information about Retail Gift Aid and this change, see section 3.42 in HMRC's detailed guidance for charities – the link is in the Resources section below.
HMRC compliance review
Three thousand charities with the largest Gift Aid claims and a random sample of several hundred community amateur sports clubs are currently receiving a letter from HMRC, saying they will receive notice to file a form CT600 company tax return this year, along with CT600E charities and CASCs supplementary pages. This is part of an HMRC compliance review of the tax exemptions currently being claimed, and whether any tax is due. It's not specific to Gift Aid, but I'm including it here because the selection of charities is based on the size of their Gift Aid claims.
Although CT600 is called a company tax return, it is used not only for limited companies but also for unincorporated associations and charitable incorporated organisations (CIOs). Normally charities and CASCs only have to submit a company tax return if they have any income or gains that tax may be due on and for which they cannot claim an exemption or relief, so most charities and CASCs never complete one. But charities and CASCs must also file a return if they receive notice from HMRC to do so, even if no tax is due. Failure to complete a return when it should be, or to submit it on time, may result in a penalty.
Very basic HMRC information about tax exemptions and reliefs is at https://www.gov.uk/charities-and-tax/tax-reliefs. Forms CT600 and CT600E, with related guidance, can be accessed on Gov.uk via http://tinyurl.com/klek43s.
· Gift Aid made simple, Sayer Vincent accountants, August 2018, 28pp: https://www.sayervincent.co.uk/resources/made-simple-guides/. Best introduction to how GA works, GA declarations, claiming GA, donor benefits, special situations, record keeping, GA audits, donations to foreign charities, GASDS, and future developments. And all in one publication, unlike HMRC guidance which involves jumping between multiple webpages.
· Claiming Gift Aid as a charity or CASC: https://www.gov.uk/claim-gift-aid. HMRC's introductory guidance to being recognised by HMRC, what GA can be claimed on, GA declarations, the GA Small Donations Scheme (GASDS) and how to claim.
· Chapter 3: Gift Aid in HMRC's detailed guidance for charities, most recently updated 1 May 2019: http://tinyurl.com/oyj4ylo.
· How to complete your Gift Aid donations schedule. HMRC, October 2018: http://www.hmrc.gov.uk/courses/syob4/giftaidsch_guide/. Updated guidance on completing the donations schedule (the list of donations that must be submitted to HMRC in order to claim GA). It clarifies the software that must be used, and explains how to download and save the schedule and complete each section. This is especially useful for charities and CASCs claiming GA for the first time.
· Gift Aid declarations, logos, infographics, FAQs and other tools to encourage more use of Gift Aid by charities and donors, developed by Charity Tax Group for the first Gift Aid awareness day on 4 October 2018: https://cfg.org.uk/tickthebox.
· Regular news on Gift Aid changes from Charity Tax Group: https://www.charitytaxgroup.org.uk/tax/donations/gift-aid/. CTG announced on 25 June 2019 that it has convened a working group to look at the future of Gift Aid from a practical and strategic perspective, and to produce a paper for HMRC's own Gift Aid working group.
Source sandy adirondack