Following an extended consultation process, the Government announced in December 2017 that it would change the relevant value test in the Gift Aid donor benefit rules by replacing the three tier threshold with two thresholds.The legislation introducing this change has been included in the Finance Act 2019. The changes will apply from 6 April 2019.
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).
HMRC guidance has now been updated to reflect this change.
New system to be introduced
Under the new limits the benefit threshold for the first £100 of the donation will remain at 25% of the amount of the donation. For larger donations charities can offer an additional benefit to donors, up to 5% of the amount of the donation that exceeds £100. Some examples are provided in the table below. The total value of the benefit that a donor can receive remains at £2,500.
|Amount of donation||Maximum value of benefits|
|£0 – £100||25% of the donation|
|£101+||25% of £100
Plus 5% of the value exceeding £100
The total value of the benefit is capped at £2,500. These limits apply separately to each donation.
For reference the previous rules were:
- For donations up to £100, the value of the benefit can equate to a total of 25% of the donation.
- For donations between £100 and £1,000, the value of benefits is capped at £25.
- For donations over £1,000, the value of the benefit can equate to a total of 5% of the donation, up to a maximum annual benefit value of £2,500.
Wider work on donor benefits
CTG is participating in a HMRC working on Gift Aid donor benefits. CTG is co-ordinating feedback from charities on behalf of the working group and you can submit comments and suggested changes here.