Gift Aid changes on giving to charities and community amateur sports clubs (CASCs)

HMRC have updated their guidance concerning a charity's obligation to make donors aware of their liability for any shortfall should they have paid insufficient tax to cover Gift Aid claims.

Donors must be charged an amount of Income Tax and/or Capital Gains Tax for the tax year in which Gift Aid donations are made at least equal to the Income Tax treated as deducted from the total of all their Gift Aid donations made in that tax year. Donors who haven’t been charged sufficient tax to cover the Income Tax deducted from their Gift Aid donations will owe the amount of the shortfall in Income Tax to HMRC.

Example

During the year ended 5 April 2016, a donor (Mr Green) wins a prize of £10,000 in a competition. He decides to share his good fortune with two charities and makes Gift Aid donations of £800 to Charity A and £1,600 to Charity B.

Charity A claims Gift Aid tax relief of £200 and Charity B £400. Therefore the total Gift Aid tax claimed by charities as a result of Gift Aid donations by Mr Green in the tax year is £600. However, Mr Green only pays Income Tax of £250 during the tax year and so he owes the shortfall in tax of £350 (total Gift Aid tax of £600 less Income Tax paid of £250) to HMRC.

What gift aid declarations must include:

In order for a Gift Aid declaration to be valid, the charity must give and be able to demonstrate it has given an adequate explanation to the donor of the personal tax implications associated with making a Gift Aid donation, including the responsibility to cover any shortfall. This explanation can be included on a Gift Aid declaration, although can also be made separately.

An appropriate declaration may be made in writing or orally. There is no set design for a declaration form or a verbal declaration, but it must include:

  • the name of your charity or CASC
  • the donor’s name
  • the donor’s home address
  • whether the declaration covers past, present or future donations or just a single donation
  • a statement that the donor wants Gift Aid to apply (this could be a tick box on a written or online declaration)
  • an explanation that the donor needs to pay the same amount or more of UK income tax and/or Capital Gains Tax as all charities and CASCs will claim on the donor’s gifts in a tax year and that the donor is responsible for any tax shortfall.

HMRC doesn’t produce an official form for Gift Aid declarations, so a charity can design its own. However, the HMRC website contains a model Gift Aid declaration and it is recommended that charities use the model adapted, as appropriate, to reflect the period of the intended Gift Aid donation(s).

HMRC’s example declaration for a single declaration can be found at: https://www.gov.uk/government/publications/charities-gift-aid-declaration-form-for-a-single-donation

More information and other related forms can be found at: https://www.gov.uk/guidance/gift-aid-declarations-claiming-tax-back-on-donations.

If you like this article and would like our FREE updates sent straight to your inbox then subscribe to our monthly newsletter

Subscribe

Get in touch

To find out more about how we can help you or your business, call us on 0808 144 5575 and speak to a member of our team. Alternatively use our contact form to send us a message or arrange a callback.

CALL 0808 144 5575

or

Contact Us

All content © 2015 Armstrong Watson. All Rights Reserved. Website by Simon Pighills.

Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Armstrong Watson Accountants, Business & Financial Advisers is a trading style of Armstrong Watson LLP. Armstrong Watson LLP is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities.

Armstrong Watson Audit Limited is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Registered as a limited company in England and Wales No. 8800970. Registered office: 15 Victoria Place, Carlisle, CA1 1EW

Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 542122. Registered as a limited company in England and Wales No. 7208672. Armstrong Watson Financial Planning & Wealth Management is a trading name of Armstrong Watson Financial Planning Limited. Registered Office: 15 Victoria Place, Carlisle, CA1 1EW