Fundamentally, Gift Aid is a tax relief on charitable donations, but it has long been possible for charities to provide some benefits to donors in connection with their donations and still claim Gift Aid, for instance as part of a charity membership scheme. There are, however, limits to the benefits that can be provided and, if the benefits do not fall within the prescribed limits, the charity will be unable to claim Gift Aid on the associated donation. The rules on donor benefits are set out in both legislation and extra-statutory concessions.
Last year, the Government issued a Call for Evidence to understand how well (or otherwise) the current donor benefit rules are working, with a view to simplifying them. It has now launched a formal consultation. This article focuses exclusively on the changes that have been proposed for the most widely-used rule; the consultation covers broader territory.
At the moment, donors may receive up to 25% of the value of any donation under £100. For donations between £100 and £1k, they may receive up to £25. For donations over £1k, they may receive up to 5% of the value of the donation, up to a maximum of £2,500.
The consultation offers two alternatives for simplifying this.
Charities would deduct the market value of a benefit to a donor from the gross amount of the donation and claim Gift Aid on the net donation.
Both options could be implemented along with a disregard for low value benefits, exempting some benefits from the rules altogether.
The alternative is to reduce the number of thresholds from three to one, with the single threshold being expressed as a percentage of the value of the donation, up to a prescribed maximum aggregate benefit value. The consultation offers a worked example using 10% of the donation as the maximum permitted value of the donor benefit (and a maximum aggregate benefit of £2,500), but points out that it is not consulting on a percentage at this stage.
This option could also be implemented alongside a disregard for low value benefits.