Charities
There were a number of new announcements made by the Chancellor in Budget 2011 that are of interest to charities, primarily in relation to Gift Aid and its administration. The changes are as follows:
Gift Aid donor benefit limits
The maximum value of the benefits that individuals and companies may receive as a result of making a donation to a charity of more than £10,000 under Gift Aid will increase from £500 to £2,500. The new limit will be subject to the existing rule that the benefit must not exceed five per cent of the gift. HMRC plans to publish revised guidance in April 2011 on Gift Aid benefits to clarify a number of issues and misunderstandings that have become apparent following discussions with stakeholders.
Gift aid: records for small donations
From April 2013, charities and community amateur sports clubs that receive small donations of £10 or less will be able to apply for a Gift Aid style repayment without the need to obtain Gift Aid declarations for those donations. The amount of small donations on which the new repayment can be claimed will be capped at £5,000 per year, per charity. In order to qualify for this new repayment, charities will need to have been recognised by HMRC for Gift Aid purposes for at least three years, have been operating Gift Aid successfully throughout that time and have a good tax compliance record. The Government will be consulting with charity representatives on the details of the new scheme over the summer 2011.
Gift aid: online filing
In 2012/13 HMRC will introduce a new online system for charities to register their details for Gift Aid and to make Gift Aid claims. As a first step towards this, HMRC will publish four new "intelligent" forms for charities to use. The forms contain automatic checks, the aim being to improve the accuracy of information and reduce the administrative burden of Gift Aid claims. HMRC plans to work with the sector to develop the new online system and to develop a supporting electronic Gift Aid database for Gift Aid declarations.
SA Donate
The SA Donate scheme is to be withdrawn for repayments of tax due on tax returns for 2011/12 and subsequent years, and for any repayments made in respect of earlier tax years on or after 6 April 2012. Self-assessment taxpayers who are due a repayment of tax from HMRC may currently direct that the repayment should be made instead to a charity of the taxpayer's choice. SA Donate was introduced in 2005 but according to HMRC it has not been well used, is not cost-effective and is vulnerable to fraud without extensive upgrading. The resources saved from the withdrawal of SA Donate will be redirected to support the introduction of an online claims system for Gift Aid.
‘Tainted' charitable donations
The law will be changed to deny tax relief on charitable donations where one of the main purposes of the donation is to receive an advantage for the donor or a connected person directly or indirectly from the charity. These donations will be known as ‘tainted donations' and there is no monetary limit on the amount of the donation which may be caught by these rules.
The rules will affect charity donations made on or after 1 April 2011 and replace the existing ‘substantial donor' rules.
