Common Gift Aid Questions Answered by HMRC

April 27, 2017 at 13:41

On the 31st March 2017, CFG hosted its regularly Gift Aid Conference  which was attended by charities, tax specialists and HMRC. HMRC’s Charity Outreach Team, led by Andrew Kayley, spoke about the Gift Aid Small Donations Scheme and Gift Aid and generously promised to respond to some questions raised in writing. Here are some of the queries and answers that were given by Andrew:

Small Charitable Donations scheme (GASDS) & Refreshments 

A payment for refreshments after a church service, at a fundraising event or a payment made to have a car washed are not eligible small donations. However, when a charge is made for refreshments or to have a car washed and an individual then makes a further cash donation then the additional amount can be treated as a small donation that can be included in a charity’s annual tax-year allowance of £8,000.

HMRC confirm that a fixed donation e.g. £5 paid in cash or by contactless payment method is a valid small donation, if the donor receives no benefits other than a lapel sticker

The following HMRC guidance on the small charitable donations scheme (GASDS) was updated on 6 April 2017;

Fixed Gift Aid Donations

A fixed minimum donation of £5 to a charity is not a valid Gift Aid donation if it is linked to the purchase of a ticket for an event, goods, raffle tickets, services etc. In HMRC’s opinion a ‘minimum donation’ = a price for the ticket etc.

Charities can (and do) appeal to donors to give £5, £10, £20, £50 or another amount. If no benefits, goods, services or tickets etc. are linked to these payments, they are eligible Gift Aid donations.

Gift Aid declarations – changes to donors’ details (aka ‘Gone Aways’)

Under the Gift Aid legislation a “qualifying donation” is made when several conditions are met, these include;

  • An individual gives the charity a valid Gift Aid declaration
  • The gift takes the form of a payment of a sum of money
  • The payment is not subject to any conditions to repayment (to the donor)
  • There are no benefits associated with the gift, or any benefits received do not exceed the Gift Aid benefit limits

HMRC confirmed that when a donor who has made a valid Gift Aid declaration to a charity subsequently notifies the charity that his/her name and/or address has changed this does not invalidate the original Gift Aid declaration. The charity can simply note in its records that a donor’s name and/or address has changed and a new Gift Aid  declaration is not required – this is confirmed in HMRC’s guidance – see Chap. 3.9.1 of detailed guidance notes for charities.

HMRC also confirmed that, when any communication or mailshot to a Gift Aid donor is returned by the Royal Mail marked ‘RLS’ or ‘Gone away’ but the donor continues to make donations to the charity, the original Gift Aid declaration is still valid.

An oral or verbal Gift Aid declaration is not valid if the confirmation letter sent to a donor is returned by the Royal Mail undelivered. This is because the donor has not been able to confirm that the details given and recorded by the charity are correct – this is confirmed in HMRC’s guidance – see Chap. 3.8.1 of detailed guidance notes for charities – ‘Invalid declarations.

HMRC confirmed that when a donor informs a charity that he/she is no longer a taxpayer the original Gift Aid declaration should be cancelled from the date the charity is informed by the donor. If the donor subsequently contacts the charity and says that he/she is now a taxpayer then a new Gift Aid declaration should be obtained to cover all future donations.

Retail Gift Aid annual statements

HMRC’s detailed guidance for charities at Chap 3.42.5 says;

“End of tax year letters are compulsory for charities operating the retail Gift Aid process using Method A and Method B. In both cases the individual must always be sent a summary of the net proceeds raised from the sale of their goods for the tax year by 31 May each year. Telling individuals of the net proceeds raised provides information which can help them check that they have paid sufficient tax to cover the Gift Aid that has been claimed. It also helps higher rate tax payers to claim in the additional tax relief on their donations.

HMRC recommend that all in-year and end-of-tax year Gift Aid letters are sent by post. Charities may use e-mail, but if a charity is alerted to an e-mail having been rejected by receiving an ‘undeliverable’ message, they must follow up and send the donor a letter by post too.”

If a letter from a charity informing a donor of goods of the amount raised from the sale of their items is sent to the address on their Gift Aid declaration is then returned by the Royal Mail, the charity can claim Gift Aid on the net proceeds of the items included in the notification letter and the sale of any further items belonging to the donor.

If the donor subsequently contacts the charity and askes for the confirmation letter to be re-issued to his/her new address then this must be done and the charity should record the donor’s new address in its records.

If you have any queries, please contact CFG’s policy team (policy@cfg.org.uk) or HMRC’s charities helpline (0300 123 1073).