27 September 2011

Gift Aid Update

In recent weeks there have been several developments relating to the Gift Aid scheme which may affect your organisation.

HMRC Payments

HMRC has announced that it is to stop paying Gift Aid by way of cheque. Where HMRC already holds bank details for the charity, all future payments will be made electronically. Cheques will continue to be used in the interim.

If your organisation has not supplied these details to HMRC, they should do so on Form ChV1, which can be found here.

Gift Aid for School Charities: New HMRC Guide

HMRC has published guidance for school charities entitled ‘Gift Aid and Payroll Giving’. This useful guide encourages charities associated with schools to make the most of Gift Aid and Payroll Giving. The guidance can be viewed on HMRC’s website here.

The guidance does not alter any of HMRC’s pre-existing guidance; however, it is a useful tool for schools charities to assess whether donations they receive might be eligible for Gift Aid. Gift Aid can be claimed on many donations made to schools charities but in many case it is not – perhaps due to a perception that it is complicated to do so.

The guidance contains many helpful simple examples of situations where a ‘donation’ is made and explains the reasons why it may or may not be eligible for Gift Aid.

The guidance places particular emphasis on the link between a donation and access to benefits. In brief, a donation which is in reality a payment for services will not be eligible for Gift Aid. For example, the payment of school fees and for access to school activities would not be eligible.

Similarly, a donation where the donor is in truth seeking to obtain a benefit for their own child, for example, where an appeal to fund extra lessons is made and only children whose parents have donated can attend the lessons, will not be eligible. If however, the access to the benefit is not dependent upon the donation such donations may be eligible.

It is hoped that by providing more user-friendly guidance to schools charities, they will be more likely to take advantage of Gift Aid where it is available.

Mass Offerings

The issue of whether Gift Aid can be claimed on donations given for the celebration of a mass for a particular individual or individuals is currently in a state of confusion.

In the Roman Catholic church where for example, a mass is said for those who are ill or facing problems, it is customary, although not compulsory, for an offering to be given to the Priest.

In August, it was widely reported that HMRC had given confirmation that such offerings did meet Gift Aid requirements as they were voluntarily given and the mass was open to the public, therefore conferring public benefit.

However, several weeks later, HMRC seemed to contradict this. A spokesman for HMRC was reported as explaining that such offerings were in fact a transaction for a service to be provided.

These contradictory statements by HMRC have not only confused the immediate issue but have also raised questions for the sector regarding the distinction between a donation and a payment for services.

We will continue to report on developments in this area.

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