Following the release of recent updates for charities claiming Gift Aid, Menzies Not-for-profit team have reviewed the key factors that are likely to be relevant to the UK charities sector.
Revised Gift aid declarations
Tax paid on what you’ve made!
The revised Gift Aid declaration, issued by HMRC for use from April 2016, was intended to clarify some common misconceptions around claiming Gift Aid. The wording now spells out clearly that donors claiming Gift Aid are making a declaration to HMRC that they have paid sufficient income tax and/or capital gains tax to cover the amount of Gift Aid that the charity would be claiming on their donation.
However with this change came a burden of responsibility for the donor to ensure they were paying adequate tax so as to avoid a situation where they were faced with an additional tax bill to make up any shortfall.
Individuals who are higher rate tax payers still benefit from an increase in their lower rate tax band for making such a donation, as there is currently no link between the declaration and this tax relief.
This slight potential tax ‘sting in the tail’, as anticipated by many charities, is that this has somewhat tainted the spirit around charitable giving even acting as a deterrent for some. Now more apprehensive about the process, fewer donors are signing Gift Aid declarations (despite still being eligible to do so) resulting in charities not being able to claim the 25% top-up on those donations.
Gift aid audits
Calculate twice, declare once!
HMRC is simultaneously increasing their focus on ensuring the accuracy of Gift Aid claims submitted by charities by performing larger numbers of Gift Aid audits on charities. Many are unprepared for this.
Whilst the outcome of these could also be beneficial to charities who are either claiming cautiously or without full knowledge of the eligible donations for claims, should a situation present whereby overstatement of claims has arisen, the charity would be faced with a repayment position. A repayment could be claimed, not only for the year under review, but in a worst case scenario, where the identified errors represent more than 4% of the claim reviewed and are monetarily greater than £500, this error rate could also be applied for previous years claims and an extrapolated repayment claim made by HMRC.
The importance of ensuring claims are prepared accurately and in-line with the rules is therefore becoming of even greater importance. The use of professional advisors to assist charities in this area can help to reduce the risks should HMRC carry out an inspection.
If you require, Menzies can carry out a Gift Aid audit for your charity and feedback on any issues we find in terms of systems, processes and data held. Please do get in touch if you would like to discuss this further.
Small Charitable Donations Act 2017 – GASDS
Get with the times – modern and small – no problem at all!
More positively, as of 6 April 2017 the GASDS (Gift aid small donations scheme) changed as a result of the new provisions of the Small Charitable Donations Act 2017 making the scheme more accessible.
Smaller and newer charities can now benefit from the scheme sooner with the elimination of the requirement for a 2 year Gift Aid history before being eligible to claim GASDS.
The scheme has been modernised to allow contactless donations to also be eligible within the scheme, thereby widening the types of donations that are eligible to have Gift Aid claimed on them and supporting charities in their moves to more technologically savvy options for donors of today.
Broadening the area in which the community buildings rules can apply to allow more charities to benefit from the work they carry on outside the building within their local communities.
A slight restriction has been implemented between connected charities that may have previously sought to claim under the main allowance in one charity and the community buildings allowance in another charity, as they may now both only claim under the same scheme.
For more information on the update to the gift aid scheme, contact Menzies Charity sector advisory team.