Over the last year, CTG has been working with HMRC in a number of areas to make certain that Gift Aid policy is applied in an even and proportionate manner and that the voice of the charity sector is heard from the outset of the policy writing process. Gift Aid was worth around £1.27bn to charities in the UK in 2016/17 and remains an exceptionally valuable form of tax relief. CTG is keen to see this benefit maximised by as many charities as possible, while ensuring that it is only claimed where eligible.

Gift Aid and online fundraising

CTG’s Gift Aid practical issues working group now has members from over 50 charities across the country, providing a quarterly opportunity for those with responsibility for Gift Aid to highlight common problems, share best practice for tackling them and suggest areas to be monitored for the future.

Over the past year, the group has had regular interactions with HMRC’s Charities Outreach team. In particular, the group has considered the issue of the high levels of Gift Aid, which HMRC has found to have been claimed incorrectly, particularly through online fundraising platforms. While the guidance is clear that, in order to be eligible for Gift Aid, donations have to be an individual’s own money with little received in return for the donation, HMRC has estimated that around £1m of Gift Aid is being paid out every month where none is actually due.

To tackle this problem, HMRC has been working with the major fundraising platforms (Just Giving, Virgin Money Giving, Every Click et al.), as well as charities that fundraise via their websites, asking them to include a series of questions in their online fundraising process to determine the source of the income and whether it is eligible for Gift Aid. HMRC has now also proposed a series of advice statements that it hopes charities directing fundraisers to fundraising platforms will include in their information packs, so that potential fundraisers are aware from the outset what they can and cannot claim Gift Aid on.

Concerns have been raised that these extra questions will adversely affect the fundraiser “journey”, though it is clear that HMRC is open to charities finding effective ways of including the information so that it does not have a cooling effect on donations. It is also worth noting that these questions are not currently enshrined in any legislation (though additional wording, drafted by CTG’s working group, is due to be added to HMRC’s Chapter 3 guidance next year) and charities are operating on a purely best practice basis – at least for the moment. Members who are concerned that their fundraising materials may not be compliant with this approach are encouraged to get in touch with CTG or with HMRC’s Charities Outreach Team.

Gift Aid donor benefits

One of the few charity-specific items in the Chancellor’s 2017 Autumn Budget, it was announced that the Government would be replacing the current three-tier Gift Aid donor benefit system with a new two-tier system. This approach will maintain the first tier, allowing benefits to the donor worth 25% of their donation of up to £100, but will implement a second tier which allows a benefit value of an additional 5% on the amount of a donation over £100. The maximum benefit value remains £2,500. All changes, including legislating for the four extra-statutory concessions (split payments rule, averaging method, 10-year rule on “lifetime” benefits and literary disregard), will all be brought into official legislation in Finance Bill 2018-19 and will have effect from April 2019.

This new solution was advocated by CTG in its original consultation response, primarily because it simplifies the current system (which users found complex, with its mixture of percentages and whole amounts), getting rid of its “cliff-edge” effect, without disadvantaging any donor or charity. Indeed, for some donation amounts, charities will now be able to offer a greater value of benefit to the donor.

On top of this, CTG is represented on HMRC’s Charity Tax Forum working group on Gift Aid donor benefits and has been tasked with co-ordinating a sector-led review of the guidance. This is an important opportunity for charities to suggest ideas for how the guidance could be clarified, or what examples could be included to make it more useful. CTG is also hopeful that this will be an opportunity to push HMRC for clarity on the “in consequence” rule and on exactly how benefits should be valued – two areas which continue to cause difficulties for charities.

Other Gift Aid developments

At the beginning of the year, the Small Charitable Donations and Childcare Payments Act 2017 received Royal Assent, implementing changes to the Gift Aid Small Donations Scheme (GASDS) to increase take-up and help future-proof the scheme. The eligibility criteria have been significantly relaxed, meaning that a charity need only have made a Gift Aid claim in the same financial year in order to make a GASDS claim. Charities will also be able to claim on a wider range of donations, with the scheme extended to include contactless payments, and in a greater number of locations if they meet the “community buildings” rules, on which further guidance has also been published. The Government estimates that these changes should increase the Scheme’s worth by around £15m a year.

CTG has also been working with the Charity Retail Association and HMRC to review the guidance for charity shops regarding end-of-year letters to donors. In particular, we have been working to clarify the situation for charities operating the new Method A or Method B processes, as well as asking HMRC to consider the possibility of a de minimis level so that charities do not have to write to donors where the value of the Gift Aid claim is very low, making it not cost-effective for the charity to process. It remains to be seen whether this will be taken forward.

Earlier this year, CTG’s Gift Aid practical issues working group also met with the Association for Interactive Media and Micropayments (AIMM), which has reached agreement with HMRC on improving the audit trail for Gift Aid claims on text donations, making it easier for charities to make claims. While the full guidance for using the process is only available to AIMM members, it is worth charities being aware that their mobile aggregator will be a member and should know about it. As well as considering AIMM membership, charities may want to get in touch with their aggregator to discuss implementing the process. With the possibility for a retrospective claim up to the last four years, this could unlock a substantial amount of money for certain charities.

Looking to the future

The Scottish Government has recently published its Draft Budget for 2018-19, which includes proposals to set new Scottish rates of income tax, which diverge from the current UK rates. As Gift Aid is administered by HMRC and operates on a UK-wide basic rate basis, this will create some anomalies going forward. Previously, there have been extensive discussions with HMRC and HMT officials on what might happen in these circumstances. The outcome of these was that charities would continue to claim relief at UK basic rate whether the donor was or was not a Scottish taxpayer. CTG will monitor developments in this area carefully and keep members posted on any changes to this position.

It is also worth noting that – as well as the working group on Gift Aid donor benefits, mentioned above – CTG is now well represented on HMRC’s Charity Tax Forum working group looking for ways to ensure that the Gift Aid system is fit for the future. As part of this group, CTG members have agreed to write two articles: the first considers the impact of the General Data Protection Regulation (GDPR) on Gift Aid, particularly in relation to the future of enduring declarations; the second will consider what the future of Gift Aid looks like, considering issues such as how to maximise Gift Aid in the face of digital transformation. We would welcome any members who might have thoughts on either of these topics to get in touch with us, so that we can ensure that the issues highlighted by both articles are representative of those being faced by the sector as a whole.