HMRC have opened a consultation, Simplifying the Gift Aid donor benefits rules, following a call for evidence about how and why charities provide benefits, and the use of the extra statutory concessions and admission disregards.

Under current rules Gift Aid is restricted where a charitable donor receives a valuable benefit as a consequence of making a donation.

  • The level of benefit that is permissible is strictly calculated according to the size of the donation.
  • It can be difficult to value benefits, especially where there is no commercial equivalent.
  • There are some oddities within the rules: for example, free entry to view charity property in return for a donation that is at least 10% more than the usual admission charge fee is not treated as a benefit.

The consultation proposes four simplifications are as follows:

  • Reforming the relevant value test
    • The monetary limits could be removed altogether.  Charities would have to calculate the net donations on which they could claim benefits by deducting the total cost of providing benefits from their gross receipts.
    • The number of thresholds could be reduced, so that for example a single 10% threshold applies to all benefits up to a £2,500 limit.
  • Disregard for low value benefits
    • Charities could effectively ignore the provision of all benefits with a value of less than £3 for example.
    • This could be introduced in conjunction with a reform of the relevant value test above.
  • Legislate the extra statutory concessions
    • According to the call for evidence responses, the concessions relating to split payments, averaging and literature are well understood and widely valued and so could be written into legislation
    • Provisions would have to be made for charities to advise donors not to claim relief on the whole of their donation where the split payment concession is used.
  • Remove the lifetime benefit concession
    • According to the call for evidence responses this concession is not used, and so HMRC proposes that it should be withdrawn.

For more detail see HMRC’s consultation document Simplifying the Gift Aid donor benefit rules.

The consultation closes on 12 May 2016.