Retail Gift Aid – end of year letters to be sent by 31 May 2019

NB. This is not relevant for charities and trading subsidiaries that use the Standard method for applying Retail Gift Aid

For charities or their trading subsidiaries using the ‘Method A’ process for applying retail Gift Aid, or for trading subsidiaries using ‘Method B’, this is a reminder that end-of-year letters/emails need to be sent out to donors by 31 May 2019.

These letters should inform donors of the total net proceeds raised from the sale of their goods during the year. Letters should also ask donors to contact the charity within 21 days if they do not wish to donate the net proceeds over the agreed threshold (£100 for Method A and usually £1,000 for Method B), or if they have not paid sufficient Income and/or Capital Gains Tax to cover the Gift Aid to be claimed back by the charity, or if their contact details have changed.

Templates for Method A and Method B can be found online; while charities may add additional information to the letters or alter the opening and closing sections, the words in italics must be used. If including additional information in their communication, charities will also need to bear in mind any agreement they have with supporters regarding data preferences.

For more information on Retail Gift Aid and the different methods for applying it, click here.

De minimis for retail Gift Aid letters

As announced in Budget 2018, the Government is introducing a non-mandatory £20 de minimis limit for letters to donors, for charities operating methods A or B of the Retail Gift Aid scheme.

Currently, a letter must be issued annually making the donor aware that they are responsible for the tax to cover, regardless of the amount of net sales.

If a charity decides to adopt the new limit, then from April 2019, a letter only need to be issued once net sales have reach £20, or every three years, whichever comes first.

We understand that updated HMRC guidance will be published in due course, with the Charity Retail Association guidance available here for its members.

Three worked examples (which relate to Method A) can be found in these slides prepared by HMRC, with further FAQs available here.