As a result of the pandemic, many charities have had to cancel fundraising events. In April 2020, HMRC announced a change to the Gift Aid rules for processing refunds, to unlock further much needed tax relief for charities.
In addition to imposing a number of specific conditions, the legislation governing Gift Aid provides that it is only available for a gift consisting of a ‘payment of a sum of money’. There had been concern at the outset of the pandemic, when events were first being cancelled, that where the charity asked a ticketholder to waive repayment of the ticket price of a cancelled event, this was, on the face of it, a waiver of a debt so that Gift Aid was not available. HMRC then confirmed that the government will allow Gift Aid to be applied to all donations made of amounts equal to the price of tickets for events cancelled because of COVID-19. As a result, charities no longer have to go through the process of refunding the ticket price with the individual then donating it back.
HMRC have now announced that the change, which was originally meant to be temporary, will be permanent. Formal guidance in relation to the change is yet to be released.
The guidance accompanying the original announcement of the change last April sets out a process which charities must follow. Charities will need to be able to show that the individual agreed to treat the refund as a donation and that they have completed a Gift Aid form.