Update: HMRC has now updated its guidance to implement the new thresholds which were introduced in Finance Act 2019 and effective from 6 April 2019.

At Autumn Statement 2014 the Government announced that it would review the Gift Aid donor benefit rules with the intention of simplifying them. Following a call for evidence, the Government launched a consultation on 18 February 2016 setting out a range of options for simplifying the current rules. The responses to that consultation were helpful in developing specific proposals for reform which were set out in a second consultation that ended on 3 February 2017. A summary of responses to the consultation was published on 1 December 2017.

The Government has announced that it will replace the current three tier thresholds with two thresholds. Under this reform donors will be no worse off in terms of the value of benefits that charities can offer them as the new limits will be, for every eligible donation, at least as generous as the current limit.

This “sliced” two threshold solution was advocated by the Charity Tax Group (CTG) in its consultation response and should help to avoid the problems of the cliff-edge effect that many charities currently face (and which can lead them to not claim Gift Aid at all).

The summary of responses confirmed that HMRC officials are setting up a working group to consider HMRC’s guidance and interpretation of legislation around donor benefits. CTG is co-ordinating feedback from charities on behalf of the working group and you can submit comments and suggested changes here.

Current System

The current donor benefit limits (the relevant value test) is a set of monetary thresholds that determine the value of benefits that charities may give to donors as a consequence of a donation and still claim Gift Aid on that donation. These are:

• For donations up to £100, the value of the benefit can equate to a total of 25% of the donation.
• For donations between £100 and £1,000, the value of benefits is capped at £25.
• For donations over £1,000, the value of the benefit can equate to a total of 5% of the donation, up to a maximum annual benefit value of £2,500.

New system to be introduced

Under the new limits the benefit threshold for the first £100 of the donation will remain at 25% of the amount of the donation. For larger donations charities can offer an additional benefit to donors, up to 5% of the amount of the donation that exceeds £100. Some examples are provided in the table below. The total value of the benefit that a donor can receive remains at £2,500.

Timeframe

Legislation to make all the changes will be introduced in Finance Bill 2018-2019 and will have effect from 6 April 2019. Draft legislation will be published in 2018.

How will it work

Size of donation (£)	Existing relevant value test	Planned relevant value test from April 2019
£25.00	£6.25	£6.25
£50.00	£12.50	£12.50
£75.00	£18.75	£18.75
£100.00	£25.00	£25.00
£500.00	£25.00	£45.00
£1,000.00	£25.00	£70.00
£1,050.00	£52.50	£72.50
£1,500.00	£75.00	£95.00
£2,000.00	£100.00	£120.00
£2,500.00	£125.00	£145.00
£5,000.00	£250.00	£270.00
£10,000.00	£500.00	£520.00
£20,000.00	£1,000.00	£1,020.00
£30,000.00	£1,500.00	£1,520.00
£40,000.00	£2,000.00	£2,020.00
£50,000.00	£2,500.00 (cap)	£2,500.00 (cap)