by Emma Phillips, Trainee Solicitor
A change to the Gift Aid Small Donations Scheme (GASDS), announced by Chancellor of the Exchequer Philip Hammond in his October 2018 Budget, is due to come into force on 6th April 2019. In advance of this change, which affects tax relief on small donations to charities and community amateur sports clubs (CASCs), we summarise below the key features of GASDS and the effect of this pending change.
What is the Gift Aid Small Donations Scheme?
Since 6th April 2013 charities and CASCs in receipt of small donations have been able to claim a top-up tax relief under GASDS. The Small Charitable Donations Act 2012, as amended by the Small Charitable Donations and Childcare Payments Act 2017, allows tax relief on small cash donations of £20 or less. From 6th April 2017 tax relief has also been allowed on contactless card donations of £20 or less. However, charities with fewer than two community buildings can only claim on a maximum of £8,000 of eligible small donations each tax year that are collected anywhere in the UK, producing a maximum tax reclaim of £2,000.
Under GASDS, charities which run their charitable activities from two or more community buildings can instead make a claim for small donations received in relation to these community buildings, for which see the ‘Community buildings’ section below.
Under the rules, a completed Gift Aid declaration is not required in order to obtain tax relief on small donations received. This is especially useful for charities which receive donations in collection boxes, charities in receipt of a large number of modest donations where it is not worth collecting Gift Aid details, and for churches which receive non-Gift Aided offerings from worshippers at regular services.
It is important to bear in mind that the normal rules on giving benefits to donors under the Gift Aid scheme also apply to small donations.
What is changing?
From 6th April 2019, the cash and contactless card donation limit will increase to £30 or less. HMRC has stated that this change is intended to bring the small donation limit for GASDS into line with the limit for contactless payments in the UK.
The rules governing eligibility are not changing. The top-up payment under GASDS is in addition to any Gift Aid which a charity or CASC might recover on other donations received. However, the top-up is capped with reference to the amount of Gift Aid donations received by the charity or CASC in the same tax year and for which a successful Gift Aid claim is made.
To be eligible, the maximum amount of small donations claimed for under GASDS for a given tax year cannot exceed ten times the amount of the Gift Aid donations received in that same tax year and which the charity or CASC has claimed for, up to the maximum £8,000 small donations limit.
Penalties incurred under the Gift Aid or GASDS rules disqualify a charity from claiming under GASDS rules in the tax year for which the claim resulting in a penalty was made, and in the following tax year. Penalties which are suspended or overturned are ignored (but suspended penalties which subsequently become payable will continue to result in a disqualification).
Connected parties and pooling of relief
GASDS rules make provision for the situation where two or more charities or CASCs are treated as being ‘connected’. The detail of these rules is beyond the scope of this blog but their existence should be borne in mind.
GASDS rules contain special provisions relating to community buildings in which charities run charitable activities. If a charity operates from two or more community buildings, it can choose not to claim top-up payments on small donations collected anywhere in the UK but instead to claim a GASDS allowance of up to £8,000 per tax year for each community building. If a charity has more than one community building in the same local authority area, it can choose which building to allocate the donations to up to a maximum of £8,000 of eligible donations for each building. However, donations collected inside a community building must be allocated to that building. These provisions entitle each community building to receive up to £2,000 in top-up tax relief per tax year.
It is important to bear in mind that CASCs cannot claim top-up payments for community buildings. Modified provisions also apply where connected charities operate from community buildings.
For more information on GASDS, Gift Aid or tax-efficient giving generally, contact our Charities Team at email@example.com or call us on 0131 228 8111.
This blog is intended as a brief commentary on changes to the Gift Aid rules for small donations. No responsibility can be accepted for any action taken in reliance of this note and specialist advice should be taken in every case. Turcan Connell would be happy to provide such advice.