Gift Aid mistakes and how to avoid them
Gift Aid was worth approximately £1.3bn to charities in 2015/16, it is too valuable to get wrong
In September, HMRC’s Charities Outreach team shared with the Charity Tax Group (CTG) some feedback it had gathered on the use of its Gift Aid claims service, including a summary of the main queries received and a review of the top errors encountered. These entirely avoidable mistakes stop charities from being able to claim relief that they are entitled to, and contribute to the full potential of Gift Aid and GASDS not being reached. Here, we list them, as well as suggesting the steps that charities should take to avoid making such mistakes.
- Wrong authorised official/agent/nominee submitting the claim
HMRC guidance is clear that only an “authorised official” can contact HMRC about a charity’s tax, whether that is filing a tax return or claiming Gift Aid. In a number of cases, Gift Aid claims fail because they are made by somebody not recognised by HMRC as the authorised official. While a charity may change personnel or appoint a new agent/nominee it is crucial that they remember to complete a change of details form (ChV1) to let HMRC know as soon as possible.
- Claiming excessively under GASDS
Under GASDS, a charity can claim a Gift Aid style top-up payment worth 25% of eligible small donations (smaller than £20), up to an annual limit of £8,000 worth of donations (£5,000 for claims up to 5 April 2016). However, charities often include greater amounts on their claims, thereby causing them to be unsuccessful. Conversations with charities suggest that many of them enter the total amount of small donations collected rather than the total eligible amount. If a charity collects donations greater than the maximum specified amount for the year, it should only enter the maximum amount when submitting a claim.
- Out of date GASDS claims
While Gift Aid and the Gift Aid Small Donations Scheme (GASDS) are connected, the two schemes are different in a number of ways, including regarding the periods to which any claim can relate. This can cause confusion when a charity attempts to make a Gift Aid or GASDS claim some time after the relevant year. Gift Aid claims relate to specific accounting periods (meaning there can be multiple claims in a tax year) and charities are allowed retrospectively to make a for the previous four years. GASDS claims, on the other hand, relate to a specific tax year and charities can only retrospectively claim for the previous two years. Authorised officials must be certain that the period for which they are making a claim is covered by the relevant scheme – and should remember that the opportunity to make a GASDS claim will run out more quickly.
- Errors completing a paper claim form
A number of common errors occur when charities claim using the paper claim form. Because these forms are sent to HMRC's scanning office to be read electronically, it is crucial that erroneous and unnecessary words (or indeed any lines or marks) are avoided as these can cause the scanner to flag up an error with the form. Forms with errors are then extracted and have to be sent to the Outreach team, sometimes causing a delay in repayments. The key is always to follow the guidance notes, which make clear where boxes should be left blank or where additional information is appropriate.
- Non-qualifying donations
The final error which regularly causes Gift Aid claims to be rejected relates to the validity of the donations themselves. Certain criteria must be fulfilled in order for a donation to be eligible for Gift Aid, and if a donation does not qualify for whatever reason, then a claim cannot be made on it. Authorised officials should consult HMRC guidance to make certain that they know what the eligibility criteria are, and that donations meet them, before making any claims.
CTG works closely with officials at HMRC and HM Treasury towards greater simplification of the Gift Aid system. Next year that will include further work on the role of intermediaries, rules on donor benefits and changes to GASDS. This will hopefully result in long-term administrative savings for charities and increased Gift Aid take-up. In the short term, however, charities can ensure they receive their full Gift Aid claim, in a timely manner if they cut out these simple and avoidable mistakes. Charities interested in receiving regular Gift Aid updates should register for CTG’s newsletter at www.charitytaxgroup.org.uk.
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Helen has advised CTG since its inception. She has represented CTG on a number of Government working groups and has also acted as European Commission specialist adviser on tax issues affecting charities. She is Managing Director of Central Lobby Consultants Ltd, which provides the Secretariat for CTG.Read more articles by this author