Gift Aid Small Donation Scheme: What is Changing?

HM Revenue and Customs (HMRC) has recently launched a second consultation on proposals to reform the current Gift Aid Small Donation Scheme (GASDS). The review was initiated as the scheme was believed to be too rigid for charities and Community Amateur Sports Clubs (CASCs). With the first consultation failing to address the most pressing issues for the sector, how will the new consultation fair?

The GASDS was introduced in 2013 as a ‘top-up payment’ on the current Gift Aid relief, allowing charities to claim 25% on cash donations of £20 or less. Although the GASDS has helped charities claim back over £21m in 2014/15, concerns that it had only raised 15% of the expected savings (£135m), provoked a review from the government.

Subsequently, at the 2015 Autumn Statement, it was announced that the annual donations limit on the GASDS will increase from £5,000 to £8,000 in April 2016. A ‘call for evidence’ consultation was also declared to take place on 9 December 2015 to seek evidence-based views on the GASDS. The consultation received over 190 responses with the largest sector bodies concluding with six recommendations. One of which was to remove or amend the matching rule clause, which states that in order to make a GASDS claim, charities must make a successful gift aid claim on donations received in the same tax year (£1 gift aid for every £10 GASDS claimed), a rule that proved to be a “barrier and burden for many charities”.

At present, 91.5% of CASC’s and charities meet the criteria, thus deeming the matching rule ‘reasonable’.

Head of policy and engagement at the Charity Finance Group, Andrew O’Brien stated, "It is disappointing that the matching rule is not up for change at present. Our survey of charities showed that this was a barrier for charities claiming the relief, and HMRC’s own figures show that thousands of charities will not be able to take full advantage of the relief as the rules stand. HMRC needs to think bigger if it wants this scheme to work effectively."

However on 20 April 2016, a second consultation was introduced with the government addressing the concern that the matching rule will not be changed. The current consultation will build on the response from the call to evidence in December with the aim to recommend reform options for the GASDS. The government are also looking at ditching the two-year rule - which means charities must pay or be registered for Gift Aid for two out of the last four years – and making a claim available in the previous year. Furthermore, a review on fairer claims for community buildings will be reviewed.

John Hemming, Chair of the Charity Tax Group, stated, “Positive changes are required to improve uptake, which is still too low, and improve accessibility. We will continue to work with officials to improve guidance and ensure that there is less complexity for charities in the administration of the scheme.”

The consultation for the GASDS will close 1 July 2016. Further information on the consultation can be found here. You can respond by emailing charitypolicy.taxteam@hmrc.gsi.gov.uk or via post to: GASDS Consultation, HM Revenue & Customs, Room G/45, 100 Parliament Street, London, SW1A 2BQ.mIf you would like to discuss your personal situation in more detail or would like more information on the tax reliefs available to you, please contact Suda Ratnam at suda@raffingers.co.uk.