No one should underestimate the challenges that Charities Online, the new way of claiming Gift Aid, is bringing to the charity sector. While the more adventurous may already have mastered it, many charities have not and might not even realise that the challenge is coming. The real crunch will come at the end of September when the old Gift Aid claim forms will no longer be accepted and Charities Online will be impossible to ignore.
Part of the problem is that Charities Online is not one system but an unholy trinity, with three ways of making claims in one. The route you follow depends largely on the size of the tax claims that your charity makes. These options reflect the diversity of the charity sector.
Many charities will use the spreadsheets that can be downloaded from the HM Revenue & Customs website. This might be relatively painless for most, but larger charities need to develop a ‘database-to-database’ solution and need either to acquire third party software or develop their own. It is unclear whether all software providers will be ready in time. Those smaller charities that do not wish to use the internet can use paper forms, but these are cumbersome to use. Will some charities with small claims simply not bother?
Complying with Charities Online cannot be done overnight. There is an activation process to go through, so it is important to leave plenty of time to get ready. Nor will many find the Government Gateway – a single page on which to register for online government services – easy to use.
Charities Online follows the pattern set for other HMRC tax compliance, where more is now required from the taxpayer. All Gift Aid claims will require more donor information, including donor postcodes. If this information is not included, a claim will be rejected. Charities will need to check that they can comply with these new data requirements. There are other changes in how tax claims must be made and charities will need to look at the HMRC guidance carefully to pick up on these.
Many charities will wonder why these changes were necessary. There will be some advantages for the charity sector, including speedier payments, but the changes benefit HMRC more, mainly by saving significantly on processing costs. The information submitted with claims will also enable them to be policed by HMRC in a more targeted and effective way. Charities need to understand that HMRC will be able to pick up errors in claims much more easily than in the past, so those who have got into bad habits should beware.
HMRC has faced a daunting challenge in trying to communicate these changes to 100,000 charities in a short period of time. Sector groups have done their best to help. We have urged HMRC to ensure that charities are given the time that they need to adapt and were successful in getting a six-month grace period. But the time is coming when we might need to seek some limited extensions to this, particularly where a charity uses the database-to-database solution. The transition to Charities Online is far from over.
Richard Bray is vice-chair of the Charity Tax Group