Charities – are you giving a ‘gift’ in return for your Gift Aid claim?

The Skiers Trust of Great Britain has issued a statement regarding a decision from HMRC which highlights the importance of ensuring that the Gift Aid rules are complied with.

The Trust confirmed that it accepted donations of “bespoke funds” to provide financial support for aspiring skiers and snowboarders identified by the donors. The Trust claimed Gift Aid on those donations. As the donations were designated for specific individuals identified by the donors, the donors were deemed to be receiving “significant benefits” in return for the donation.

The charitable activities of the Trust were frozen for a period of time whilst they clarified the legal position and awaited the outcome of the investigations.  They have now stopped accepting donations on a “bespoke” basis and have made it clear that any donations previously accepted on that basis will not be recoverable by the donor.

Gift Aid is a government scheme which enables charities to reclaim the basic rate of income tax on donations made to them by UK taxpayers. The charity reclaims the tax directly from HMRC, so the amount of the donation is increased without any extra cost to the donor.

For Gift Aid to apply, the following rules must be satisfied:

  • the gift must be to a charity;
  • the donation must be of money;
  • the donor must pay sufficient UK income tax;
  • the donor must make a valid Gift Aid declaration (except in relation to the small donations scheme); and
  • the donor must not receive significant benefits from the charity in return for the donation.

Charities can give modest benefits to individual donors, or their relatives, as a token of appreciation for the donation, but the benefit must be within certain limits. The limits are based on the amount of the donation and the value of the benefit.

In the case of the Trust, in order to ensure future compliance with the Gift Aid rules, they intend to:

  • establish a ‘pool’ of the best British skiers and snowboarders; and
  • match donations to the individuals in the pool on the basis that, although donors may request to be matched with a beneficiary, this will be at the discretion of the Trust and “no absolute guarantee can be given”.

If you would like more advice on this subject, please contact Jenny Smith on 01905 677052.

Get In touch