Gift Aid Small Donations Scheme - how Stewardship have helped

By Kevin Russell | 28 November 2012 | Comments (6)

HMRC

The Gift Aid Small Donations Scheme, which will be introduced from April 2013, is very nearly law. The Scheme will allow a new ‘Gift Aid style top up payment’ from the Government on cash donations (such as church collections and bucket collections) but without the need to obtain a Gift Aid Declaration from the donor.

Stewardship has played a central role in the development of this Scheme. We:

 

  • provided input to HMRC, and the Treasury, to the conceptual design of the Scheme;
  • commented on drafts of the Bill that will govern the Scheme;
  • took part in a public consultation, and responded with a number of comments and observations

 

I was called by the Government as an expert witness, to provide evidence to the House of Commons Public Bill Committee, scrutinising the Bill.

 

As a result of this, the Bill has been significantly amended since it was first published and, a number of the amendments directly respond to the concerns that Stewardship expressed to HMRC and the Government: 

 

Gift Aid Matching rule


As originally proposed, in order for a charity to claim for £1 of cash donations under the Scheme, it would have to claim for at least £1 of Gift Aid donations as well. This ‘matching’ rule is designed to reduce the possibility of fraudulent claims. However, we were concerned that this would limit the ability of very small churches and charities to fully benefit, even if they did receive £5,000 of cash donations in a given year, because their Gift Aid income may not be high enough.

Stewardship asked for this ratio to be increased from 1:1 to 10:1 (so that for each £1 of Gift Aid claim, the charity would be able to claim on £10 of cash donations). We were therefore delighted that the Government, this week, agreed to not only increase the ratio but to increase it right up to 10:1 as we originally requested.

 

Eligibility requirements


Before becoming eligible for the Scheme, a charity would need to be registered with HMRC for Gift Aid purposes for at least three years, and to have made successful Gift Aid claims in three of the last seven years. Stewardship expressed concern that this will make it difficult for new charities, and for church plants that become independent of their mother church, to benefit under the Scheme when these are just the sort of charities that need the sort of help that the Scheme offers.

Stewardship therefore asked for this rule to be modified so that ‘younger’ charities could benefit from Year 2, albeit with a lower limit than the £5,000 offered by the main Scheme.

Whilst the Government did not make exactly the change that we pressed for, they have this week changed the Bill so that a charity becomes eligible after two years, and on the basis that successful Gift Aid claims have been made in two out of the last four years.

 

Community buildings rule (1)


In addition to the £5,000 of small cash donations that all charities would be able to claim on, where a charity (such as a church) has meetings in a ‘community building’ (which is defined in the Bill), they will be able to claim on an additional £5,000 of small cash donations. Commercial and residential buildings were excluded from this opportunity.

We were able to persuade Government to modify the commercial buildings restriction so that churches that meet in (for example, leisure centres, cinemas and theatres) will now be able to qualify for these additional payments.

 

Community buildings rule (2)


In order for a community building to be eligible for the additional top up payments, charitable activities need to be carried on with at least 10 persons on at least six occasions during the year. In counting the 10 persons, the Bill as originally drafted excluded some volunteers, persons employed by the charity and officers or trustees of the charity. We were concerned that this would mean that smaller churches would be excluded as volunteers, employees and trustees will typically also be church members.

The Government accepted these concerns and deleted reference to volunteers, employees, officers and trustees.

 

Connected charities rule


In order to prevent charities artificially splitting into a number of new charities in order to gain access to top ups on multiples of the core £5,000 limit, a connected charities’ rule will state that where certain conditions exist, a single £5,000 limit will be shared by all of the connected charities.

Stewardship was worried that because of the many close family connections that exist in the local church, this rule may impact, wrongly, by connecting a number of local community charities, where this was not intended by the legislation. HMRC therefore worked closely with Stewardship to test out a revised connected charities rule.

Charity mergers


We were concerned that where a charity changes its legal form (for example, changing from a charitable trust to a Charitable Incorporated Organisation), or where one charity merges with another, that the eligibility criteria are carried over from the predecessor to successor organisation. This was built into the original Bill but required the predecessor organisation to be dissolved. We pressed for this requirement to be dropped since there are circumstances in charity law whereby the predecessor organisation should be retained. The Government tabled amendments to the Bill that removed the requirement to dissolve.

 

The Small Charitable Donations Bill will now be considered by the House of Lords in December. Once enacted, we will publish a Briefing Paper on the Scheme, tailored to the needs of churches and Christian charities and containing illustrative examples of how you can maximise the benefit for your church or charity.

Posted by Kevin Russell

Our Legal Eagle guru and Stewardship's Technical Director, Kevin constantly has his finger on the pulse of all things tax and charity law-related. His briefing papers for charities, churches and individuals are an invaluable resource on everything from VAT to Gift Aid. 

comments:

A L Gilmour

December 4, 2012 11:27 PM
Kevin

THANK you VERY much - another great and workable conclusion.

Blessings
Archie

Ian Henley

January 31, 2013 9:43 AM
This is great info! Thank you.

A quick 2 questions...

1 - How do we calculate the weekly 'Small Cash Gifts'?
Can we simply add us the cash, divide by 20 and the answer is the Total Small Cash Gift for that week?
It's impossioble to tell if any individual has given 1 x ?5 note or 3 x ?20 notes.

2 - Can we assume that the Total Small Cash Gift for each week has been donated by tax payers?

Many thanks.
Ian

Kevin Russell

February 5, 2013 7:06 PM
Thanks, Archie for your encouraging comments.

And thanks, Ian, for your questions which I am sure will help others to understand the Scheme.

I am not sure what you mean by calculating the weekly small cash gifts. Perhaps you can clarify?

You make the very valid observation that a church will not necessarily know if an individual has given 1 ?5 note or 3 x ?20 notes. The Small Donations law says that:

"where a gift of cash is made to the charity and its 'managers' do not know whether the gift is ?20 or less, the [conditions around what qualifies as a cash donation] ... [can be treated as] met if the managers have taken reasonable steps to find out."

The key phrases are "do not know" and "reasonable steps". To know is of course slightly different from "to suspect". So, the law does not require the church leadership to make extensive enquiries to find out. To take an example, if there are three ?20 notes all rolled up together, it is reasonable to assume that they are from the same donor. Equally if there were ten crisp ?20 notes all with sequential serial numbers in the offering, it would again be reasonable to assume that they were part of a single donation. However, if the offering basket were (rather fancifully) to contain only ?20 notes, but they were all separate and there was no way of definately connecting them, I would say that all of the cash would be capable of qualifying as 'small cash donations'. Of course, this assumes that the congregation is not so small as to make it impossilbe for all donors to have given ?20 or less!

With regard to your second question, there is no need to assume anything about the tax status of the donors. Although the Scheme has been (somewhat misleadingly) named Gift AId Small Donations, the top up payments under the Scheme are not tax refunds but public expenditure. The whole purpose of the Scheme being that it is often difficult or impossible for charities to obtain Gift Aid declarations from those giving small cash donations or putting cash into an offering plate or bag.

To be clear, small cash donations under the Scheme qualify regardless of whether or not the donor is a taxpayer. They would NOT however qualify if that donor has given the charity a Gift Aid declaration and the charity knows that the gift is from that particular individual. Gift Aid itself should be claimed instead.

We have now produced two Briefing Papers on the Scheme: a detailed Paper and a shorter, Practical Guide. These are both available for free download from the 'Resources' Section of our website. From that page, follow the link to 'Briefing Papers' and then click on the 'charity tax' tab.


Jen Carter

February 11, 2013 4:00 PM
Ian, thanks for this helpful answer, it clarifies the issue well.

Sam Tyler

February 28, 2013 1:15 PM
Very useful information, thank you.
One question,
Is a gift of £20, or in excess of £20 excluded from 'Small cash donations'?

David Stevenson

April 22, 2013 11:25 AM
Two queries spring to mind with regard to our Church.
1.Donations of ?20 or under qualify for GASDS but I have no doubt that some donors will contribute almost every week(say) ?10 making a total of (say) ?500 per annum although we have no way of knowing this.Does this still qualify for GASDS ?
2.Do we need to wait until the tax year has finished before submitting a claim for GASDS.I estimate that we will break ?5,000 by 31/12/13(our own financial year end) and so can we reclaim ?1250 in our return 6/4/13 to 31/12/13 and reclaim nil in our next return to 5/4/13 ?

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