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Gift Aid: Changes to declarations and maintaining the levels of giving

Kevin Cooper

In November 2015 HMRC published new model gift aids for single and multiple donations. Whilst the "simplification" is welcome, there are also new information requirements that have received less positive reactions.  Charities were required to update the declarations used, by 5 April 2016.
With the increase in personal allowances to £11,000 (2016-17), and the new dividend allowance of £5,000, individuals may now be taken out of tax altogether. 

What information is required?
The model statement has been rearranged to try to improve the gift aid messaging, in order to reduce the amount of text donors have to read. The main text body in the new declaration now reads:
"I am a UK taxpayer and understand that if I pay less Income Tax and/or Capital Gains Tax in the current tax year than the amount of Gift Aid claimed on all my donations it is my responsibility to pay the difference."
The new wording also removes any references to VAT and council tax. HMRC is therefore trying to make it clear that the individual may be asked to pay the tax, where it is found that they have not paid enough to "cover" their donation to charity.

In November 2013 the National Audit Office conducted a report into Gift Aid relief and donations. Within this report, they estimated that "£55 million might be paid in error in refunds to charities where the donor had not paid the tax." In context, this is a fraction of the £1.19bn paid to charities in the UK in 2014-15, but might be truly significant to a donor, whose income now falls within the higher tax allowances, when asked to repay.
For example, a regular donor who set up standing order payments of £20 per month to a charity a number of years ago having signed a regular gift declaration - but who has not since notified the charity of their change in their status, has permitted the charity to claim a further £60 in gift aid per annum. This might then result in a future demand for the related tax from the donor.

Whilst the old regular giving declarations remain valid for those continuing to give, the updating of declarations does act as a reminder to the donor to consider their change in circumstances.

What should charities do?
It is imperative that charities reduce the risks of upsetting their donors in future by doing the following:
  • Update their new Gift Aid declarations in line with HMRC's new requirements - if they have not already done so, and take every opportunity to bring them up to date,
  • Check their systems for recording declarations, and storing in a safe place,
  • Encourage donors to inform them if their circumstances change - whilst encouraging the donors to continue their level of support.