Government prepares for Gift Aid reform

Arts organisations are being given the chance to have a say on the reform of Gift Aid rules that currently limit the benefits they can offer to donors. The Treasury is calling for evidence to help it understand how the current rules are being understood and applied, to identify any barriers and problems they present, and to gather suggestions as to how the rules could be simplified and improved.

Gift Aid allows charities to reclaim the basic rate of income tax deducted on money donated by UK taxpayers. Currently worth 25p for every £1 donated, it is one of the largest reliefs available to charities. To help encourage giving, HMRC has already taken some steps to streamline the process of claiming Gift Aid, such as introducing online filing, simplifying processes for digital channels and launching a Small Donations Scheme for cash donations. But arts organisations continue to be challenged by a complex set of rules that limit the value of benefits that charities may give to a donor if they are claiming Gift Aid on their donation.

When the scheme was first introduced, Gift Aid could only be claimed on donations and no benefits could be given or received in return. Subsequently charities have been allowed to give certain benefits to donors as a ‘thank you’, such as memorabilia, special rates, priority booking facilities, and invitations to social events. But the Government has found that charities are struggling to understand the rules and, rather than seeking to understand and comply with them, are failing to claim Gift Aid on some donations. Describing the current rules as “no longer fit for purpose,” it is inviting the submission of evidence as a prelude to a formal consultation later this year, which will set out proposals for reform.

The call for evidence closes on 9 October 2015.