Government launches consultation on changes to the Gift Aid Small Donations Scheme

HMRC has launched a consultation on proposed changes to the Gift Aid Small Donations Scheme (GASDS) to help ensure it benefits as many charities as possible.

Background

Since 6 April 2013 eligible charities have been able to claim top-up payments under the GASDS on small cash donations received of £20 or less.  This meant that eligible charities did not have to obtain a valid Gift Aid declaration or provide any other audit trail back to the donor's tax record.

Top-uppayment could be claimed in respect of small cash donations up to a maximum of £5,000 in small cash donations.  Since 6 April 2016 the maximum amount of small cash donations under the GASDS has increased to £8,000.

The Government acknowledges that claims made under GASDS have been much lower than originally estimated.  For example, in the tax year 2014-15 there were 19,300 charities who claimed a total of £21 million of top-up payments under the GASDS, which constitutes less than a quarter of the £85 million estimates in HMRC's legislative impact assessment.

The government therefore announced in the 2015 Autumn Statement that it would review the GASDS.

Proposed reforms

On 20 April 2016 HMRC published a consultation on proposals to reform the GASDS.  The closing date for responding to the consultation is 1 July 2016.

• Eligibility criteria – HMRC has proposed to simplify the eligibility criteria so that more charities are eligible to use the GASDS

• Small cash payment rules – the GASDS can be claimed on gifts made by an individual of £20 or less in cash. However, the government has resisted calls from the charity sector to increase the limit and to include donations made by cheque, text message or direct debit.

• Connected charities and community buildings rules – The connected charities and community buildings rules were initially intended to ensure that broadly similar results were achieved for groups of charities, whether they were structured as one  national organisation or a "group" of individual charities. Since it is accepted that the rules are not working as intended, HMRC has proposed that the rules should be amended to allow charities in a "group" to claim under either the main GASDS allowance or under the community buildings allowance, but not both.

In our view the GASDS rules are overly complex and making the scheme difficult to access and administer, particularly for smaller charities.  The government's plans to scrap the two-year eligibility rule is to be welcomed as a step forwards but further reforms are needed if the GASDS is to work effectively across the charity sector.

If you would like more information about our Charities team and how it can help your organisation, please contact Chris Hook using 0191 211 7811 or [email protected].