HMRC clarifies guidance on Gift Aid and donated goods

HMRC has amended its entry-level guidance on the Retail Gift Aid process operated by charity shops.

We have been told by HMRC officials that this follows a number of calls to the charity helpline asking if the Retail Gift Aid process can be applied to items donated for sale at a charity fundraising auction, on the basis of this part of the guidance note.

The guidance section Selling donated goods on behalf of individuals previously stated:

This process is not exclusive to charity shops. It can also apply to donated goods sold on the internet or at a public auction.

It now states:

This process is exclusive to charity shops that operate a retail Gift Aid scheme to sell goods on behalf of donors. To maximise the amount that is raised, charities can sell valuable or collectible items donated to a shop at a commercial public auction or an online auction website.

Charities are reminded that donated goods sold through an online shop are eligible for Retail Gift Aid so long as it is not an auction format. Charities may choose to sell valuable or collectible donated goods through an auction process, but this is only one option and these goods can of course continue to be sold within a shop setting and continue to be eligible for retail Gift Aid, assuming all the other eligibility conditions are met.

The remainder of the guidance section remains unchanged. It states:

Money raised by selling donated goods like clothes does not qualify for Gift Aid. You need to explain to owners of donated items that the shop, auction or website will act as their ‘agent’ to sell goods on their behalf if the owner will give the sale proceeds (minus any commission charged) to the charity as Gift Aid donation.

If you operate a charity shop, staff and volunteers must explain the arrangements before donors complete a form appointing you as their agent.

The owner has the right to keep all of the proceeds from the sale of their goods. They can choose to donate all or part of the amount. You can claim Gift Aid on the agreed amount after any commission (including VAT) has been deducted.

The owners of donated goods will usually make a Gift Aid declaration when they ‘sign up’ for the scheme, before their goods are sold.

Detailed guidance on the retail Gift Aid process can be found here