Further consultation to inform Gift Aid donor benefit rules

A further consultation on Gift Aid donor benefit rules has been launched by Government after an initial consultation failed to result in consensus about reform to the value test.

The Treasury received 61 responses – almost half from arts and cultural organisations and their representatives – to its consultation on proposals to simplify the current rules.

In its response to the consultation, which closed in May, the Government said: “A very wide range of views and opinions were expressed by respondents and these have informed the further development of specific options for reform.”

As a result of the consultation, the Government plans to introduce a disregard rule for low-value benefits but it has rejected calls by arts organisations to extend the ‘admissions disregard’ rule to live performances, saying this is beyond the remit of the consultation. The rule currently allows heritage organisations to claim Gift Aid on the total revenue from the sale of a ticket if the ticket gives the buyer access to a heritage site for a full year, or the buyer pays a 10% Gift Aid ‘premium’ on top of the standard admission price.

Value test reform

The current value test stipulates:

for donations up to £100, the benefit can equate to 25% of the donation’s value
for donations between £100 and £1,000, the value of the benefit is capped at £25
for donations over £1,000, the benefit can equate to 5% of the donation’s value, up to £2,500 annually.

The consultation asked for feedback on proposals to change or reduce the three monetary thresholds that determine the value of benefits that charities may give to donors and still claim Gift Aid.

None of the proposals received strong support although most respondents were in favour of retaining the thresholds in some form. The further consultation puts forward three new proposals for threshold reform: three thresholds with a reduction to the upper limit for the £25 threshold; two thresholds operating to a ‘sliced’, or cumulative, design; or a single threshold.

The further consultation also asks about how the proposed new value test should work in combination with the new disregard rule for low-value benefits.

Around a third of respondents called for benefits to be valued on their cost, rather than their market value. Many cited the difficulties associated with calculating the market value of some benefits, particularly those provided by third parties and intangible benefits, such as priority booking or naming rights.

Extra Statutory Concessions

Also as a result of the initial consultation, the Government plans to legislate all ‘Extra Statutory Concessions’ currently offered by HMRC.

The four ‘Extra Statutory Concessions’ currently offered allow charities to provide benefits above and beyond the strict limits set out in the donor benefit rules. They are:

The split payments rule, which allows charities to deduct a benefit’s market value from the gross donation and claim Gift Aid on the rest of the money donated;
The averaging method, which allows charities to average the cost of a benefit over a number of donors;
The lifetime benefits rule, which allows charities to value the cost of a lifetime benefit over a ten-year period; and
The literature disregard rule, which prescribes that literature describing or promoting a charity is assigned no financial value.

The government intends to require charities to explain to donors how much of their donation is eligible for Gift Aid when using the split payments rule, despite the majority of respondents indicating this would constitute a significant extra burden.

The further consultation is open for responses until 3 February 2017.