Following last year's Gift Aid consultation, this 2008 budget contains rather more charity specific measures than usual

Gift Aid gets reprieve

In a surprise move, the Government announced that charities will be reimbursed for the Gift Aid losses incurred when the basic rate of tax changes in April.  From 6 April, churches and charities will have to claim at the new basic rate of 20% (giving a reduced refund of 25 pence for every pound given), but HMRC have confirmed that they will calculate and pay transitional relief to make up the difference to the current rate of 22% (28 pence for every pound given).

Due to a legal complication however, the additional payments cannot be made by HMRC until after the changes get Royal Assent, expected to be late July. Once Royal Assent has been given, claims are still to be made at the same 20% rate but HMRC will give the additional relief payments with, or alongside, the appropriate Gift Aid payment.

This is different from early reports in the charity press that mistakenly said that charities will be able to continue claiming 28 pence for every pound.

Payroll giving is unaffected by this announcement.

'Substantial Donor' consultation announced

In another positive move, our representations to HMRC and our lobbying of Government (together with others) has opened the door to potential changes to the problematic substantial donor legislation.

This legislation is rightly intended to counter the use of charities for tax abuse but it actually catches innocent transactions as well. The legislation gives rise to many unforseen implications which puts an unjustifiable burden on charities' record keeping and compliance.

We will be inviting contributions from others as we prepare our response to the newly announced consultation.