At recent Charity Tax Forum meetings, HMRC proposed that charities should collect full forenames (more than the current minimum requirement of an initial) for there to be a valid Gift Aid Declaration. This proposal would have been effective from April 2019 and was part of their efforts to reduce the “tax gap” resulting from Gift Aid claims being made where the donor has not paid sufficient tax to ‘cover’ the claim made by the charity.

Members of CTG’s Gift Aid working group expressed concerns about both the proposal itself and the timeline for introducing it, which we conveyed to HMRC. We suggested a meeting with HMRC and we are pleased to report that a positive and proportionate way forward has been agreed.

There will be no mandatory implementation or hard start date, but charities will be strongly encouraged to provide HMRC with full forenames wherever that is practical and possible to do so. There will be no retrospective action taken i.e. current Gift Aid Declarations will remain valid.

CTG proposes the following next steps for charities claiming Gift Aid.

• Check what percentage of your Gift Aid records include a full forename
• If you hold a full forenames for donors include them in your Gift Aid claim
• Try to collect full forenames in future where practical and possible to do so – inform staff, volunteers and software providers about this
• Document any actions undertaken to improve collection of first name information
• Provide feedback to CTG on any difficulties experienced or negative responses received from donors

A full note of the meeting has been agreed with HMRC officials, with the highlights summarised below

Note of the CTG/HMRC meeting on Gift Aid Declaration content (4 December 2018)

HMRC has told us that changes to the Gift Aid guidance will be introduced in the near future, and CTG has asked to be closely involved in its development to make sure it is practical and fair.

Overview

The driver for this proposed change is concerns about the “tax gap” and the research findings that an estimated £180m of Gift Aid is claimed each year in respect of non-tax payers (approx. 10% of the total value of the scheme). HMRC is aware that in some homes there will be people with the same initial and surnames (e.g. James and John Smith) that cannot be distinguished without the full name being included. HMRC therefore believe that requiring a full name would allow them to identify more donors enabling them to deal better with Gift Aid claims in respect of non-tax payers. It is clear that that the Government expects HMRC to tackle the “tax gap”.

Other more problematic proposals (such as requiring date of birth and National Insurance numbers) have been mooted and cannot be ruled out if the Gift Aid ‘tax gap’ persists.

As charities we recognise HMRC’s concerns, but we have cautioned that this not very targeted approach would result in charities losing a lot more legitimate Gift Aid than the value of incorrectly claimed Gift Aid HMRC would save. We have also suggested that research would be needed to know if requiring full names would actually make any difference or whether other factors may be more of a reason for incorrect claims should such a proposal be made mandatory. We argued that it would be better to try a range of approaches including charities better reporting address/contact information and reminding donors with older declarations to renew them if possible. Furthermore, we urged HMRC to ensure that any changes were not mandatory or tied to a tight implementation schedule (which would have disproportionate administrative and financial impacts for charities).

Following CTG’s meeting with HMRC it has been agreed:

• There will be no mandatory implementation or hard starting date in April 2019. Instead HMRC is looking to see a gradual improvement in claims including full forenames.  This will help HMRC to match donors to ensure their eligibility to claim Gift Aid. As previously confirmed, there will be no retrospective application taken in respect of Gift Aid Declarations that charities already have.
• It will be sufficient for charities to accept names that donors could reasonably be ordinarily known by, rather than needing to check whether this is the donor’s legal name. A full forename would be sufficient, but could include shortened names, e.g. Chris rather than Christopher and even Lottie for Charlotte. No changes to the wording on the Gift Aid Declaration would therefore be needed to accommodate these changes, although charities should try to request full names where possible on future declarations.
• Where charities hold donors’ full names they should submit this data.  We know that some charities hold this information but do not include it in Gift aid claims for practical reasons as it has never been mandatory to do so. Charities are encouraged to document any actions undertaken to improve collection of first name information.