In April 2013, a number of enhancements to the Gift Aid scheme were introduced.

Gift Aid Reclaims

There are now three options for making gift aid reclaims:

HMRC’s online service;
Third party or in-house software;
Paper form ChR1, which replaces the old R68(i).
These more automated processes undoubtedly enhance HMRC’s ability to interrogate the data provided in claims and to investigate irregularities. It is therefore more important than ever to maintain proper records. For all donations, a minimum of the donor’s initials and surname, house number and postcode should be recorded along with the date and value of the payment.

Small Donations Scheme

Eligible charities and community amateur sports clubs can now take advantage of top-up payments on small cash donations of £20 or less where it is difficult to collect a gift aid declaration. Stringent eligibility conditions restrict the scheme to those organisations with a good compliance history. Claims are capped at £5,000 per year and there are rules to prevent connected bodies claiming more than £5,000 between them. Every £10 of small donation claims must be matched by £1 of normal gift aid reclaims. This matching requirement and the lack of overall cap on normal gift aid reclaims should serve as incentive for charities to encourage donors to sign gift aid declarations whenever feasible.

Community Buildings

An additional ‘community building amount’ is available for small donations collected as part of charitable activities run in community buildings. These will typically be places of worship or town halls. The rules defining charitable activities and community buildings are detailed but are clearly designed to encompass things such as collections at regular church services, whilst excluding purely fundraising events. This additional relief is also subject to a cap of £5,000 per community building used by the charity.

Charity Shops

Charity shops are increasingly utilising arrangements that allow them to make gift aid reclaims on the value of donated goods sold. These arrangements typically involve shops selling goods as agents on behalf of donors who agree to donate the proceeds to the charity. Until recently, this required relatively sophisticated procedures to be able to trace and link sales to donors and invite them to donate the proceeds after sale.

The rules have now been relaxed to allow one-off gift aid declarations covering up to:

£100 of future sale proceeds from goods sold by a charity itself; or
£1,000 of future sale proceeds from good sold by a trading subsidiary.
Charities running their own shops may therefore wish to consider setting up a trading subsidiary.

Get up to speed now!

Although these developments are generally welcomed by the charitable sector, organisations need to familiarise themselves with the new rules quickly to ensure they maximise the benefit.