CTG responded to the Government’s latest consultation on simplification of the Gift Aid donor benefit rules.
CTG Vice-Chairman, Richard Bray, commented:
“CTG welcomed the opportunity to respond to this consultation, as well as the chance to participate in recent round-table events with HMRC and HM Treasury. Our response follows consultation with our members, including our Gift Aid working group, which consists of Gift Aid managers from over thirty leading charities.
“In summary, CTG supports a two threshold spliced arrangement with 25% benefit value applicable to the first £100, and 5% applicable to any value above £100 (to the current benefit value overall cap), with no disregard for low value items, but preserving current disregards, and clarifying the literature disregard.”
In November 2016, the Government published a summary of responses and its proposals on the previous Gift Aid donor benefits consultation, which closed on 12 May 2016. CTG’s original response can be read here. The Government also published further consultation questions on the relevant value test and the merits of introducing a low-value disregard.
Summary of proposals by Government
- The current maximum annual benefit value of £2,500 would continue to apply in all cases.
- On the relevant value test, there was a lack of clear consensus around any single reform proposal. As such, the Government does not believe that it would be right to proceed with implementing any of the reforms proposed at this stage.
- Instead it has developed a further set of reform proposals aimed at reflecting more specifically the preferences and concerns expressed by respondents.
- The Government is open to adding a low-value disregard alongside any revised threshold(s), subject to affordability constraints. The Government has invited further responses on the detail of the level of this disregard.
- A disregard would operate on the basis that the total value of all benefits offered in respect of each donation must not exceed the disregard limit. Where the total value of all benefits exceeds the disregard then it would not apply, and the relevant value test monetary threshold(s) would be applied in respect of the cumulative value of all benefits offered.
- Regarding ESCs, the split payments rule, the averaging method and the literature disregard are widely used and valued by charities. Whilst apparently not frequently or widely used, the lifetime benefits rule appears to be of value to some charities and the Government is persuaded that there are good reasons to retain it. The Government therefore intends to legislate the effect of all 4 of the Extra Statutory Concessions.
- When legislating the split payments rule, the Government intends to require charities to explain to donors how much of their donation is eligible for Gift Aid. The Government considers that such a requirement strikes the correct balance between the interests of charities and of donors.
- The Government does not intend to extend the Gift Aid admissions disregard rules beyond their current scope but will keep the matter under review.
- The Government will form a working group comprised of HMRC, HM Treasury and charity sector representatives, to consider both guidance and also HMRC’s interpretation and application of legislation relating to donor benefits.
- VAT is not within the scope of this review. There may, however, be some limited scope for the working group to consider specifically whether the donor benefits rules have unintended consequences for charities with regard to their VAT liabilities.
- The Government would welcome specific suggestions from stakeholders regarding how it could improve its approach to communicating future reviews.
Given the lack of consensus on the relevant values test, the Government proposed three further options:
- Retaining three thresholds. The thresholds would remain under the same structure (25% on donations up to £100, £25 above that), but with the third tier allowing benefits up to 5% beginning at donations of £500 or above.
- A single threshold. The Government would be likely to set the single threshold at a rate in the region of 10% if accompanied by a disregard for low value benefits, or in the region of 15% without a disregard (final exact rates will be decided in due course).
- Two thresholds. This system would work by applying one percentage rate to the first element of a donation (25% on the first £100 of the donation) and a different rate to any amount exceeding this (in the region of 2-4% if accompanied by the low-vale disregard; in the region of 5% if not). The total of these would be the permitted limit to the value of donor benefits.
Given these options, the Government has further questions for consultation:
- Would any, or all, of the three relevant value reforms above represent a useful simplification of the current thresholds? If so, which one(s)? Please explain why.
- Which of these relevant value reforms do you consider would be simplest for the charity sector overall? Please explain your reasons.
And on the topic of the low-value disregard, to which the Government is open if it is of genuine value to the charities sector, whilst also being affordable, appropriate, and consistent with EU rules on state aid:
- Would you consider a low value disregard a welcome simplification if the government does not move to a single threshold but instead either retains three thresholds or moves to a two-threshold system? Please explain your answer.
- In your opinion, what is the minimum level at which a low value disregard would be useful to charities? Please give reasons for your answer.