Gift Aid

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Changes to Gift Aid in the 2008 budget

A reduction in the basic rate of tax to 20% from April 2008 would have meant a reduction in the amount of tax relief claimed by charities from 28p for every £1 donated to 25p.  

However, the Chancellor announced a transitional rate of relief to cover the next three tax years i.e. until March 2011.  This means that the estimated £8 million that would have been lost by Church of England parishes will now be retained.

When is the additional relief due?

The relief is due on any donations a church or charity receives from 6 April 2008. So when you make your claims for 2008 donations, you will need to complete 2 schedules:

• One for the period from 1 January to 5 April 2008 at the 22% rate (28.2 p per £1 donated), and
• One for the period from 6 April to 31 December at 20% rate (25p per £1 donated).

You will not need to claim the additional relief as it will be added to your claim automatically by HMRC.  HMRC will not be able to make any payments of the additional relief until the budget receives Royal Assent (likely to be in July). If you make regular Gift Aid claims and you claim for donations received in the 2008/09 tax year before this, then the additional relief will be sent afterwards. After this, HMRC will pay the Gift Aid and transitional relief at the same time.

Parishes are advised to submit an interim claim during the year for the January to April 5^th period.

Simplifications Brought In

The Treasury also announced a package of measures designed to smooth the processes used for claiming Gift Aid, and auditing these claims.

Claiming Gift Aid on ad-hoc smaller donations

With immediate effect, an adjustment is being made to the Gift Aid claim process to allow smaller donations of no more than £10 to be aggregated up to £500 within claims.  This means that charities who have collected donations of money for which they have also received a Gift Aid Declaration (GAD), have the option of making a claim on form R68 without having to list all the individual donor names on the form. For churches, this usually refers to one-off Gift Aid envelopes.

The underlying GADs must be kept for individual donations and this procedure will only apply to charities where collections have been made with a supporting GAD.

Gift Aid Audits

HMRC will now operate a de minimis error level of 4% below which charities who claim a total of less than £2,500 in Gift Aid repayments each year will not be penalised for errors in their Gift Aid claims. Further, HMRC will accept that where charities and churches can repair errors identified in a population within an audit sample, they will extrapolate that repaired error rate across the population rather than the error rate found in the first instance. ‘Repaired’ means that the charity finds the missing declaration, or obtains a new (or fully completed) declaration from the taxpayer.

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