HMRC Under Fire for Chasing Compassionate Donors for Charity Gift Aid Contributions

On October 2015, HM Revenue and Customs (HMRC) published a ‘one-off’ Gift Aid declaration to be introduced to charity and Community Amateur Sports Clubs (CASC’s). However, HMRC face backlash from the Low Incomes Tax Reform Group (LITRG) who believe they are wrongly pursuing more money from donors. The current Gift Aid Scheme helps charities and CASC’s save thousands each year in tax relief. A recognised charity or CASC can benefit from Gift Aid, which allows them to claim back up to 25p on every £1 donation received within the last four years.

The new Gift Aid Declaration form, used to claim, will be mandatory for all charities CASC’s to use from April 2016 and will only be applicable to single donations made by donors. HMRC’s updated forms have been redesigned to include simpler wording with the aim to increase Gift Aid on donations.

What is New?

• References to VAT and Council Tax deleted
• Shorter in length and has a clear call to action expressing the value of a Gift Aid claim
• The declaration requires donors to pledge that they will pay equal tax (at least) on the gifts that they make

The revised wording includes a line, which suggests that if the individual pays less tax in a year than the amount of Gift Aid claimed on all of their donations, they are responsible to pay the difference. However, concerns have arisen from the new wording as many feel that it dupes non-tax payers to pay tax on gifts they make. LITRG believe that HMRC are exploiting low income donors who set up online standing orders when giving online. The new declaration would mean that low income donors who forget to cancel their tax declaration, will still have to pay at least the equal amount of tax, even if they are a non-tax payer in the second year.

LITRG believe this could become even more prevalent in 2016 due to the introduction of the Personal Savings Allowance and the Dividend exemptions set at £5,000. This combined with the nil per cent rate on savings and yearly increase in personal allowance each year, could mean more and more donors will have to pay tax.

Anthony Thomas, Chairman of the Low Incomes Tax Reform Group, said: “When the widow is generous with her mite, the last thing we want is for HMRC to pursue her for tax on the donation… Twice in the past 13 years, when Finance Bill clauses on Gift Aid have been debated in Parliament, a Treasury minister has given an assurance that when a non-taxpayer makes a gift and mistakenly uses Gift Aid, HMRC’s practice is to approach the charity for reimbursement of the tax element of the gift, rather than the donor. The same should apply when a donor erroneously continues with a regular gift under a Gift Aid declaration made when they were a taxpayer.”

Charities are recommended to begin use of the new wording immediately and no later than 5 April 2016.