People who fundraise for Charities need be aware of two important changes to tax relief thresholds for charities that came into effect from 6 April 2019. Charities often encourage donations by giving a small reward to their donors. However, there is little agreement on the question of reducing the number of monetary thresholds. To make sure changes to tax relief threshold can still be claimed, the benefit value thresholds will be simplified in April, further reducing the thresholds. The new limits will be:
- For donations up to £100: 25% of the value of the gift (as before);
- Donations over £100: £25 plus 5% of the excess over £100;
- Maximum annual benefit £2,500 (as before)
Charities cannot at present claim Gift Aid on a donation from which a donor receives any sort of benefit, such as a thank-you gift, unless the donation is worth significantly more than the value of the benefit.
Other alternatives, such as removing the relevant value test and aggregate value test and operating the Gift Aid rules donor benefits through an extension of the split payment approach allowed under an extra statutory concession.
Fundraisers in general will need to be aware of certain grey areas within the gift aid rules on assessing benefits ‘associated with’ donations. ABS Accountancy advices to take care or get professional advice.
Charities can still offer an additional benefit of 5 per cent to donors on the amount of the donation that exceeds £100.
The then Chancellor George Osbourne said in his 2014 Autumn said that Gift Aid rules surround donor benefits would be reviewed with the intention of simplifying them. Following a three-month period of consultations the Treasury & HM Revenue & Customs published the proposals back in 2016, would be put out to a second consultation in 2017.
Chancellor Philip Hammond announced in his 2017 Autumn statement further changes to the rules about how much benefit charities can give to donors and still claim Gift Aid would be made by scrapping the middle threshold thus creating a two-threshold system.
Mr Hammond further announced further Changes to tax relief thresholds by legislating all current existing extra-statutory concessions surrounding issues such as admission property.
Other changes to tax relief thresholds
This measure simplifies the donor benefits Changes to tax relief thresholds on donations. Which apply to charities who claim Gift Aid.
It will replace the current mix of monetary and percentage thresholds that apply to charities that have to consider when determining the value of benefit they can give to their donors without losing out on the entitlement to claim tax relief on the donations given to them.
From April 2019 the benefit threshold for the first £100 of the donation will remain at 25% of that amount. Charities can offer an additional benefit of 5% to donors on the amount of the donation that exceeds £100. on donations.
Gift Aid Small Donations Scheme increase approved (GASDS)
The maximum donation upon which a charity can claim a Gift Aid style top-up payment under the Gift Aid Small Donations Scheme (GASDS) is to be increased from £20 to £30.
The changes to tax relief thresholds enable the GASDS being more widely used, as compared with regular Gift Aid, the Scheme is still largely unused. Under the rules, a completed Gift Aid declaration is not required in order to obtain tax relief on small donations received. This is especially useful for charities which receive donations in collection boxes the tax relief threshold will particularly make an impact among charities and donors. The increased limit is now aligned with that of the maximum contactless payments in an effort to take advantage of this easy form of payment.
Gift Aid declarations – changes to donors’ details (aka ‘Gone Aways’)
Under the Changes to tax relief threshold legislation a “qualifying donation” is made when several conditions are met, these include:
- An individual gives the charity a valid Gift Aid declaration;
- The gift takes the form of a payment of a sum of money;
- The payment is not subject to any conditions to repayment (to the donor);
- There are no benefits associated with the gift, or any benefits received do not exceed the Gift Aid benefit limits
This blog is intended as a brief commentary on changes to the Gift Aid rules for small donations. No responsibility can be accepted for any action taken in reliance of this note and specialist advice should be taken in every case. ABS Accountancy would be happy to provide such advice.