HMRC ran a consultation from 11 November 2016 to 3 February 2017 on Simplifying the Gift Aid donor benefits rules and has now published its summary of responses.
Current rules:
In order for Gift Aid to be available on a donation there is a limit on the level of benefits the charity can provide to the donor:
|
Donation |
Maximum benefit |
|
Up to £100 |
25% of the donation |
|
£100 - £1,000 |
£25 |
|
Over £1,000 |
Lower of 5% of the donation and £2,500 |
Consultation:
With regard to reforming the relevant value test, HMRC proposed three options:
- Retaining three thresholds, which would be slightly different from those in place currently. The new thresholds would be:
- Donations up to £100: 25% of the gift
- Donations between £101 and £499: £25
- Donations over £500: 5% of the gift
- Reducing to two thresholds, which could be:
- 25% of the first £100 of a donation
- Between 2 to 4% of additional amount if there is a disregard for low value benefits, or
- 5% of any additional amount donated if there is no disregard for low value benefits
- Reducing to a single threshold, which could be:
- 10% of a donation if there is a disregard for low value benefits, or
- 15% of a donation if there is no disregard for low value benefits.
The consultation also considered disregarding low value benefits, with a suggested cut off of £3.
Replies:
There were 37 responses, mostly form charities.
The most popular suggestion was that there should be two thresholds, as it simplified the system by removing a threshold without causing a drop in the level of benefits. The single threshold was rejected as it would cause an issue for charities receiving a large number of small donations.
A significant number of respondents felt that a low value disregard would not be a simplification and would unfairly benefit large charities (as they could negotiate lower rates from suppliers). Almost all those who commented on the value of disregard suggested it should be at least £5. It was also suggested that updating this for inflation would add complexirty.
Government Response:
The government proposes to introduce a two threshold system from 6 April 2019:
|
Donation |
Maximum benefit |
|
Up to £100 |
25% of the donation |
|
Over £100 |
£20 plus 5% of donation, to a maximum of £2,500 |
This is favoured because it simplifies the rules without reducing the value of benefits to any donor.
Given the responses, the Government will not introduce a disregard for low value benefits.
Legislation will be introduced in Finance Bill 2018-2019
Links:
Further Consultation: Gift Aid Donor Benefits
Simplifying the Gift Aid donor benefits rules: response to the further consultation
