Simplification of donor benefits rules for Gift Aid
Published 6 July 2018
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Who is likely to be affected
Charities and their donors.
General description of the measure
This measure simplifies the donor benefits rules that apply to charities who claim Gift Aid tax relief on donations.
It will replace the current mix of monetary and percentage thresholds that charities have to consider when determining the value of benefit they can give to their donors without losing the entitlement to claim Gift Aid tax relief on the donations given to them.
From April 2019 the benefit threshold for the first £100 of the donation will remain at 25% of that amount. Charities can offer an additional benefit of 5% to donors on the amount of the donation that exceeds £100.
The total value of the benefit that a donor can receive remains at £2,500.
Policy objective
The government recognises the value of Gift Aid to the charity sector and is looking at ways to simplify and improve the current Gift Aid rules. Recent improvements include the introduction of online filing of Gift Aid claims and a shorter, simpler Gift Aid declaration form.
The conditions that govern the benefits that donors to charities can receive for making a Gift Aid-eligible donation (the Gift Aid donor benefit rules) are an important element of the Gift Aid scheme. It is important for donors, charities and the government that robust, clear rules are in place.
The changes in this measure will introduce a simpler and a more generous 2 threshold benefit valuation rule for charities, making it easier to claim Gift Aid on eligible donations and so increase the overall number and value of claims.
Background to the measure
At Autumn Statement 2014 the government announced that it would review the Gift Aid donor benefit rules with the intention of simplifying them. Following a call for evidence, the government launched a consultation on 18 February 2016 setting out a range of options for simplifying the current rules.
The responses to that consultation were helpful in developing specific proposals for reform which were set out in a second consultation that ended on 3 February 2017. Summary of the responses to the last consultation was published on 1 December 2017.
Draft legislation was published for consultation on 6 July 2018.
Detailed proposal
Operative date
The measure will have effect in relation to gifts and payments made on or after 6 April 2019.
Current law
Gift Aid income tax relief provisions are in Part 8, Chapter 2, of Income Tax Act 2007 and section 197 of Corporation Tax Act 2010.
Proposed revisions
Legislation in Finance Bill 2018-19 will introduce amendments to section 418 of Part 8, Chapter 2, of Income Tax Act 2007 (ITA) and section 197 of Corporation Tax Act 2010 (CTA). The current restrictions on benefits will change to new 2 tier cumulative benefits thresholds.
Where the amount of the gift by an individual or a payment by a company does not exceed £100 the benefit restriction is 25% of that amount. For gifts and payments exceeding £100, the benefit restriction will be the sum of £25 and 5% of the amount of the excess subject to the overall benefit restriction of £2,500.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure allows charities to give larger benefits to individual donors to encourage more donations.
However, it is not possible to quantify the number of individuals that may be affected because HMRC does not collect information on benefits given to donors.
Equalities impacts
The equality implications of this measure have been considered, and it is not expected that it will have any adverse impacts on groups with protected characteristics.
Impact on business including civil society organisations
Around 160,000 charities are registered with HMRC and of these 72,000 claimed Gift Aid in 2016-2017.
The changes to the gift aid rules are expected to make it easier for these charities who offer benefits to donors to claim Gift Aid on eligible donations and this could increase the overall number and value of claims.
This measure is expected to have a positive impact on business and civil society organisations’ administrative burdens. Negligible one-off costs will include familiarisation with the new rules and adjustment of their benefit calculations to reflect the new thresholds.
Negligible on-going savings are expected to result from the simpler process for calculating donor benefits and claiming Gift Aid.
Operational impact (£m) (HMRC or other)
Overall this change will have negligible impact for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review using information provided in correspondence and regular feedback at forums with the charity sector.
Further advice
If you have any questions about this change, contact Hasmukh Dodia by email: charitypolicy.taxteam@hmrc.gsi.gov.uk.