Consultation on simplification of the Gift Aid donor benefit rules

Update: The Government has announced that it will replace the current three tier thresholds with two thresholds. Under this reform donors will be no worse off in terms of the value of benefits that charities can offer them as the new limits will be, for every eligible donation, at least as generous as the current limit.

This “sliced” two threshold solution was advocated by the Charity Tax Group (CTG) in its consultation response and should help to avoid the problems of the cliff-edge effect that many charities currently face (and which can lead them to not claim Gift Aid at all).

The legislation introducing this change has been included in the Draft Finance Bill 2018-19. The changes will apply in relation to gifts by individuals and payments by companies made to charities on or after 6 April 2019. Read more here.

Following last summer’s Call for Evidence on simplification of the Gift Aid Donor Benefit rules, HM Treasury launched a formal consultation on possible reform options.

The consultation has now closed and CTG has responded. CTG’s response to the original Call for Evidence can also be read here.

The Government, having taken the evidence received into account, has put together two possible reform options, only one of which could be progressed. Alongside these two proposals are a number of additional simplifications which could be adopted as a package, separately, or not at all.

The first reform proposal suggests removing the monetary thresholds on benefits altogether; either relying on a calculation of the amount of donations on which Gift Aid can be claimed by deducting the cost of providing Donor Benefits from a charity’s gross donation receipts, or reforming the regulations to apply the split payments rule across all Gift Aid claims. This would simplify the rules for those charities that tend to provide intangible benefits (e.g. priority booking services), in particular. Other benefits, such as discounts offered to donors, may be considered as being provided at zero cost to the charity.

The second reform proposal suggests retaining the principle of monetary thresholds but reducing their number from three to one. The remaining threshold would be expressed in terms of the value of the benefit as a percentage of the associated donation, up to the prescribed maximum aggregate benefit value. The government is not consulting on a particular percentage threshold at this stage; rather, it would welcome views on whether such a simplification of the existing Donor Benefit rules would be welcomed by charities in principle.

Suggested additional simplifications are:

  • a disregard for low-value benefits. This would enable Gift Aid to be claimed on the gross value of an eligible donation as long as the total benefits provided to the donor in consequence of that donation did not exceed a certain low monetary threshold. Some benefits – and, by extension, potentially some charities – would thus be exempted from the rules altogether.
  • the legislation of Extra Statutory Concessions – the split payments, averaging method and literature concessions. The government will need to ensure that there is a robust mechanism in place for charities to notify their donors of the amount of their donation that qualifies for Gift Aid.
  • the removal of the lifetime benefits rule. This is primarily due to the fact that the evidence suggested that charities do not use the rule.

One outcome of the consultation may be that the status quo is largely maintained, and separately there is a firm commitment to reviewing the guidance available (both in terms of content [including work on the interpretation of the in consequence rule] and accessibility [in terms of navigating]. There is also scope to suggest alternative proposals, so long as they fall within the parameters of the consultation.