As Gift Aid only applies to gifts of money, donations of goods for sale through a charity shop or otherwise do not qualify for Gift Aid.
However, a charity can offer to act as an agent for supporters and sell goods on their behalf. If the supporter agrees to donate the sale proceeds, and signs a Gift Aid declaration, that donation can then qualify for Gift Aid, under the Retail Gift Aid scheme.
There are a number of detailed requirements and implications set out in the detailed guidance on Retail Gift Aid on the HMRC website . The Charity Retail Association also publishes a detailed Retail Gift Aid guidance manual. Access is limited to CRA members only, so if you would like to access it, please contact them directly.
HMRC guidance sets out three alternative methods (Standard Method A and Method B – depending on whether the charity operates the shop itself or via a trading subsidiary) for operating retail Gift Aid, and includes standard template letters to be used for each alternative. These are required to in order to notify donors either periodically or at the end of the tax year of the proceeds which have been raised from the sale of their goods, and to give them the option not to donate the proceeds, at least in excess of pre agreed limits.
A presentation and FAQs from HMRC on the April 2019 Retail Gift Aid changes (a non-mandatory £20 de minimis limit for letters to donors, for charities operating methods A or B of the Retail Gift Aid scheme, meaning that a letter only need to be issued once net sales have reach £20, or every three years, whichever comes first) can be found here.
HMRC’s revised guidance also requires charities to keep records of training for staff and volunteers, and charities should also carry out their own checks to ensure the relevant method is being operated correctly.
Note also that these arrangements can have VAT implications. If a charity offers to act as an agent without making a charge, that is a non-business transaction and therefore outside the scope of VAT. The charity will not be able to claim back the input VAT on either the direct costs of providing the service or on any associated overheads. This differs from the sale of donated goods, which is a zero-rated supply for VAT purposes, so any input tax suffered by a VAT registered charity can be offset against these supplies.
12 March 2019
2 August 2018
21 September 2016
13 July 2016