Partner Sayer Vincent
Share this content
Tags:

What has HMRC changed on Gift Aid?

Helen Elliott examines the updated HMRC Gift Aid guidance and outlines where many charities may be missing out.

5th Nov 2019
Partner Sayer Vincent
Share this content
White Keyboard wih Donate Buttons
istock_microstockhub_aw

Gift Aid is an important source of income for many charities and is now worth £1.35bn a year to the charity sector.

All UK charities can benefit from Gift Aid but according to HMRC, many are failing to take advantage of it, mainly through a lack of understanding. HMRC research suggests that 25% of charitable donations that are eligible for Gift Aid are not Gift Aided – this costs charities more than £560m a year.

It’s important to make sure charity clients check they are claiming Gift Aid wherever possible on donations, and that any benefits provided to donors are within the benefit levels permitted if possible.

HMRC has recently updated its long and detailed ’chapter 3’ guidance on Gift Aid which gives extensive information on all aspects including valuing benefits and when Gift Aid can and cannot be claimed.

The donor benefit limits were smoothed out from April 2019, so are now slightly higher where the donation is between £100 and £1,000:

Donation To March 2019 From 6 April 2019
Up to £100 25% of the donation 25% of the donation
£100-£1,000     £25

£25 plus

5% of the donation over £100

Over £1,000 5% of the donation
Overall annual limit £2,500 £2,500

The key changes to the ‘chapter 3’ Gift Aid guide on how to value donor benefits include:

  • Extended charity literature concession: electronic as well as paper newsletters, magazines etc about what the charity does can be ignored as a gift aid benefit when supplied in return for a donation.
  • Valuing non-ticketed events: for events to which members are invited as a benefit of membership, the benefit per member is based on the cost per attendee at the event, not per member. This is a disadvantage where you have an event knowing only a proportion of the members will attend. However, HMRC does say only direct costs need to be included in the valuation, not apportioned overheads.
  • Fundraising events in honour of a donor: there is no benefit for the donor being honoured but there is for others attending.
  • Discounts for members including from third parties: these can be valued on an average take-up basis per member provided the charity keeps records of the value of all discounts. If the charity arranges for a third party to provide discounts to your members these should be included but if they are unsolicited by the charity but provided anyway, they do not need to be included as a benefit.
  • Naming rights: HMRC now says that if you name a building after an individual the donation is not eligible for Gift Aid unless the naming is unsolicited and not expected in return for the donation.
  • Split payment concession narrowed: HMRC now says the donor needs to know the market value, not be aware of it as previously, and must be able to buy the benefit separately without a donation.

We have recently updated our free Gift Aid made simple guide, one of a series we write for charities on tax, management and financial issues. This explains clearly when Gift Aid is available when it is not, and the necessary steps required to be able to claim it.

Tags:

Replies (10)

Please login or register to join the discussion.

avatar
By Trethi Teg
05th Nov 2019 16:28

Had an elderly client die half way through year so her income did not reach personal allowance. Entered gift aid contributions routinely only to discover that the rules of Her Majesty's Robbers and Crooks meant that her estate would have had to pay back the tax claimed by the charity. I decided to delete the gift aid entry on the return so the miserable b******s did not get their money.

Is someone going to report me to the Ethics Comittee? Struck off and £10,000 costs probably.

Thanks (0)
Replying to Trethi Teg:
avatar
By Ian Bee
06th Nov 2019 11:01

I came across this same problem earlier in the year and raised it with my MP.

The case I had was someone living off savings as they were only a couple of years away from retirement when they would receive an occupational pension. In fact their savings were quite large but the income was all tax free as they were held in ISAs.

It seems that it will also affect pensioners who might well live on less than £12,500 per year.

It could be resolved if personal allowances could be disclaimed in part or in full. My MP was quite receptive but HM Treasury were not so that's as far as I got.

Thanks (0)
Replying to Trethi Teg:
Chris M
By mr. mischief
06th Nov 2019 11:03

A bit risky that. Can I suggest you change tack to issuing clean audit reports to bankrupt banks, and helping to bring the global financial system to meltdown?

This will reduce your risk of disciplinary action to near zero.

Thanks (4)
Replying to Trethi Teg:
By SteLacca
06th Nov 2019 11:44

This is not a new thing and has always been the case. If the donation has been gift aided there is no option other than to declare it on the Return and pay the tax as necessary.

Thanks (0)
avatar
By flightdeck
06th Nov 2019 11:30

I completely agree in sentiment but gift aid is a redistribution of a tax receipt so if tax has not been paid then where is the relief (this money) to come from other than HMRC taking it from the pot of tax it receives and which would otherwise be spent on all its other obligations like the NHS, education etc.

Thanks (0)
Replying to flightdeck:
avatar
By Trethi Teg
06th Nov 2019 12:06

Hello Flightdeck - are you a script writer for Jeremy Corbyn or perhaps a representative of HMRC in disguise?

I shall tell my eledelry clients to make sure that they are feeling ok and that they can guarantee living until the end of the tax year before making gifts in future.

Thanks (0)
Replying to Trethi Teg:
avatar
By flightdeck
06th Nov 2019 12:59

haha! I know, I did sound a bit like that! I am most definitely not affiliated with either of those. Nor am I a personal tax affairs accountant so the subtleties here may be lost on me ... when you give a charity some money and tick gift aid then the charity claims back £x from HMRC, yes? If the giver then dies AND does not go over the personal allowance then that charity is now in receipt of money that HMRC would argue it should not have had because in fact there was no tax receipt from the giver out of which to pay the charity that money. The onus is on the giver to have some understanding of their tax affairs and if hovering somewhere around the threshold then maybe not elect to gift aid? Actually it is only in response to this article that I have had a think about gift aid and the non tax payer situation. Is the core issue that people do not understand that if they do not pay tax yet merrily say yes to gift aid (which charities do press on you a bit), you do not realise that the charity will still collect the gift aid but you will then become liable to repay that to HMRC so in effect your donation now becomes £x + 20%?? I hadn't realised that was how it would work but only because I hadn't had cause to think about it. How else could it work?

Thanks (0)
Replying to flightdeck:
avatar
By Halex
06th Nov 2019 20:56

Perhaps you would do best to familiarise yourself with some actual gift aid declarations. I can assure you that charities make it very clear on their gift aid form that you must pay income tax and that you will be liable for the gift aid claimed if you do not pay enough tax. HMRC have suggested wording on their website which I think you will find many charities copy word for word.

Thanks (0)
Replying to Halex:
avatar
By Trethi Teg
07th Nov 2019 08:31

I think you both miss the point I was trying to make. It is not about understanding the rules etc it's about HMRC reclaiming tax from a dead person's estate when the poor [***] who is now pushing up daisy's was trying to do their best by contributing to charity but failed to take into account that they weren't going to live until the next 5 April. Surely the "rules" could be framed to ensure that in the year someone died they would not claw back a small amount of tax on charitable giving.

Thanks (1)
Replying to Trethi Teg:
avatar
By flightdeck
07th Nov 2019 11:14

You are right Trethi Teg and I completely agree with your solution that dying mid financial year should absolve your estate of a gift aid repayment liability. This would cost HMRC buttons but if they were feeling particularly mean they could cap it at a few hundred quid.

Thanks (1)