Gift Aid Small Donations Scheme reforms a 'missed opportunity'

Small donations
Small donations

The Institute of Fundraising has described the HM Revenue and Customs’ planned reforms to the Gift Aid Small Donations Scheme as a "missed opportunity" because they won't enable more charities to benefit from the scheme.

The GASDS, which was introduced in 2013, allows charities to claim Gift Aid-like relief on up to £8,000 of small cash donations each year without paperwork for each individual claim.

A recent HMRC consultation, which ran between 20 April and 1 July and followed another GASDS consultation that closed in March 2016, made various proposals to simplify GASDS and increase take up across the charity sector.

In its summary of responses following the latest consultation, published on Wednesday, HMRC says it will now scrap some eligibility criteria, such as the two-year rule – where charities have to be registered on the system for at least two years before accessing GASDS – and the two-in-four rule – where charities must have claimed Gift Aid in two out of the previous four tax years before claiming under the GASDS.

Instead, charities that have claimed Gift Aid in the previous tax year will be eligible to claim under the scheme.

The IoF has also said HMRC’s final proposals, including the failure to remove the matching rule, which says that charities must claim £1 in Gift Aid for every £10 claimed under the scheme, amount to a missed opportunity to reform GASDS for the better.

Stephanie Siddall, policy officer at the IoF, said: "While some steps will be taken to improve the scheme, we feel that more could have been done.

"We believe this was a missed opportunity to make the changes necessary to enable more and smaller charities to benefit from the scheme, particularly by maintaining the matching requirement which we, alongside other sector bodies, strongly recommended should be removed."

HMRC argued in the consultation that 91.5 per cent of charities and community amateur sports clubs claimed enough Gift Aid to meet the matching requirement, and that the rule is therefore reasonable.

Other changes announced in the summary of responses include making contactless payments eligible for GASDS.

But HMRC says in the document that it will not increase the small donations limit – currently at £20 – despite calls to do so from some consultation respondents.

It also says it believes it unnecessary to include cheques, SMS donations, direct debits and other electronic payments in the scheme as they are unlikely to be used in situations where it is impractical to claim Gift Aid.

HMRC also says that national charities run out of multiple buildings, such as denominations of churches, will be able to claim under the GASDS or the community buildings allowance, but not both, and community buildings rules will be amended to allow donations received outside community buildings but within the same local authority area.

HMRC’s latest consultation on the GASDS was criticised by the Charity Finance Group in April for its failure to propose scrapping the matching rule.

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