Retail Gift Aid changes

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 also planning to update its detailed guidance on the Retail Gift Aid scheme and its FAQs.

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

FAQs prepared from HMRC

Can a donor still request a letter if the amount is less than £20 

Yes. Charities operating retail Gift Aid will need to give a choice to the donor who wishes to receive annual letters.

When will the change come into effect?

The change comes into effect from tax year 2019-20.

When must I send a letter if the sale of a donor’s goods raises £19 in 2019/20 and nothing in the next two years.

You must send a letter at the end of the third tax year which in this case would be following the end of the 2021/22 tax year.

When must I send a letter if the sale of a donor’s goods raises £21 in 2019/20?

As the amount raised from the sale of the donor’s goods is more than £19 you must send the annual letter after the end of the tax year 2019/20.

When must I send a letter if the sale of a donor’s goods raises £19 in 2018/19 and £21 in 2019/20?

As the amount raised from the sale of the donor’s goods is more than £19 in 2019/20 you must send the annual letter after the end of the tax year 2019/20.

Can I send e-mails, texts etc, rather than letters?

You can use electronic communications to tell donors about the amount raised from the sale of their goods. However, the communication must use the wording provided in the HMRC template letters.

If my letter covers multiple years, do I need to specify the amount raised in each year?

If your letter covers multiple years you will need to specify the amount raised in each year. This allows the donor to confirm that they have paid tax for the relevant tax year(s) to cover the donation for Gift Aid repayment.

Do I need to send an annual letter if none of the donor’s goods have been sold?

You don’t need to send an annual letter or a letter at the end of the three tax years if none of the donor’s goods have been sold in the year or throughout the three year period.