News & events
02/07/2012 - Gift Aid small donations scheme
The Small Charitable Donations Bill was introduced into Parliament on 21 June and it is proposed the scheme should take effect from 6 April 2013. It will allow charities to claim an amount equivalent to tax at the basic rate on small donations where it has not been possible to obtain the details necessary for a Gift Aid claim.
In essence, it is simple. A charity that collects small donations (donations of up to £20) can claim 20% of the amount raised, up to an overall limit of £5,000. The formula is Amount of Donations x Basic Rate of Tax/100 – Basic Rate of Tax. For example, a church which collects £5,000 or more in a year in its plate collection could claim a further £1,250 from the Government. If the donations amount to £4,000, the amount that could be claimed would be £1,000. There are however complications to deal with charities that have a group structure and because HMRC is concerned that the scheme will be open to abuse.
A charity could divide itself into smaller units and claim a limit of £5000 for each one. Despite the comparatively small sums involved, the Bill deals with this. Where charities are "connected” in a group, the £5000 limit will be divided between all of them that claim payments under GASDS. The difficulties are in the definition of "connected”. Charities will be connected if, amongst other things, they share a common trustee or have trustees who are closely related. In addition, if one charity, A, is connected to another, B, and B is connected to a third, C, A and C will be connected charities. This is clearly an area of potential complication.
This provision would affect, for instance, religious charities that have a number of separate charities grouped under a diocese or district. Here, the Bill provides that the charity is entitled to a £5000 limit in respect of donations made in each community building in which charitable activities take place plus a limit of £5000 in respect of other donations made to the charity.
There are some odd conditions. The charitable activities must be carried out at the same community building with a group of at least ten members on at least six occasions in each year. A community building is a place of worship, village hall or other building which is accessible to the public – a collection taken at a church would be eligible for GASDS but not a collection at a house group. In some circumstances, adjoining buildings may be treated as one community building. In these cases,
There are other provisions to counter abuse:
- The scheme will only apply to donations collected in the UK.
- An organisation must have a clean record of three years' satisfactory Gift Aid claims in the last seven years before being able to claim under the GASDS. If no Gift Aid claim is made for three consecutive years, any prior years claim will be ignored.
- If a charity has a penalty imposed upon it in relation to a Gift Aid claim, it will not be able to claim GASDS for that year or the next two years.
- GASDS will only be paid if it is matched £1 for £2 by claims made under the Gift Aid Scheme in the same year.
GASDS is to be welcomed for small charities but they will have to be careful to ensure that they promote Gift Aid donations and manage their Gift Aid administration well in order to ensure that they qualify for the scheme.