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.
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|
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.