Charities will be able to claim a type of Gift Aid on donations under £20

Government introduces Small Charitable Donations Bill

Scheme will boost small donations
Scheme will boost small donations

A bill that would allow charities to claim up to £1,250 in top-up payments on small donations has been introduced to parliament.

The Small Charitable Donations Bill, which was put before the Commons yesterday, will allow charities and community amateur sports clubs to claim Gift Aid-style payments on individual gifts of under £20 without an accompanying Gift Aid form on up to £5,000 of donations.

The bill says the measure, known as the Gift Aid Small Donations Scheme, will require charities to have already claimed Gift Aid for at least three years out of the preceding seven in order to be eligible.

Charities that have been penalised for not following Gift Aid rules properly will not be able to use the scheme for the next three years.

In addition, charities must have claimed £1 under Gift Aid each year for every £2 they want to claim through the GASDS.

Because the scheme is not linked directly to donors’ tax payments, it is classified as public expenditure rather than tax relief.

Chloe Smith, the Economic Secretary to the Treasury, said in a statement that the scheme was targeted at "small charities that rely on bucket collections, where it is impractical to get the paperwork required under Gift Aid". They would now be able to claim a Gift Aid-style payment on small donations without the need to collect donors’ details.

Hannah Terrey, head of policy at the Charities Aid Foundation, said the scheme would be difficult to use and was "unlikely to have a major impact on charity fundraising, particularly for small charities".

She said that many smaller charities did not claim Gift Aid because of the complexity of the system and would not be able to use the GASDS.

"The existing Gift Aid scheme is outdated and needs to be simplified for donors and charities," she said. "We need a complete overhaul of Gift Aid to ensure it is fit for fundraising in the age of the internet and the smartphone."

John Hemming, chair of the Charity Tax Group, said the scheme was an improvement on that proposed in a consultation in April.

He said that the government was now proposing to require charities to raise only £1 for every £2 they wanted to claim through the GASDS, rather than the £1 to £1 ratio originally put forward.

HM Revenue & Customs had also clarified rules that would prevent "connected charities" from claiming two sets of payment under GASDS, he said, making it clear that it would apply only if the two charities shared trustees and had purposes that were "the same or substantially similar".

"Although the legislation is more complex than the sector had hoped, it reflects HMRC’s efforts to accommodate charities in the scheme irrespective of how they are structured," he said. "CTG welcomes HMRC’s willingness to adapt the scheme based on feedback from the sector."

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