In April a number of changes to the rules on Gift Aid were implemented, including some welcome simplifications. These changes reflect the government’s objective to simplify and improve the Gift Aid rules, recognising the value that Gift Aid has to the charity sector.
Gift Aid Small Donations Scheme
On 6 April 2019, the limit applying to the Gift Aid Small Donations Scheme was increased to £30, to match the contactless card spending limit. This scheme allows charities to claim top-up Gift Aid on small donations without any additional paperwork. The overall maximum of £8,000 per tax year has not changed. This is a welcome change that should make it easier for charities to collect small donations from donors, particularly in informal settings such as collections.
On 6 April 2019 (1 April 2019 for companies) the rules around associated benefits were simplified. These rules allow for a small benefit to be offered to the donor making a Gift Aid donation, without jeopardising the Gift Aid status.
For donations that do not exceed £100, the benefit restriction is 25% of the gift. For gifts exceeding £100, the benefit restriction will be the sum of £25, plus 5% of the amount above £100, up to an overall maximum of £2,500. For example, if a donor makes a Gift Aid payment of £2,500, the charity is able to offer an associated benefit of up to £145. This represents a sensible simplification to the rules, giving charities more clarity about the maximum value of the benefits they may provide. Negligible benefits (such as a newsletter or sticker) continue to be outside the scope of these rules.
However, HMRC are potentially tightening up their compliance checks in relation to Gift Aid rules and are aware that there is a £138m tax gap every year caused by errors in Gift Aid returns. This has prompted HMRC to write to a number of charitable groups to ask for a tax return to be filed this year, even if the charity would normally be exempt from this filing.