A Small Donations Bill, introduced in the Queen’s Speech, will allow charities to claim ‘top-up payments’ similar to Gift Aid on small donations totalling up to £5,000 a year without individual paperwork.
The Gift Aid Small Donations Scheme would allow charities to submit claims for payments of 25p for each £1 donated, on any number of donations of £20 or less, without needing Gift Aid declarations, up to £1,250 a year.
It is intended to reduce the administrative burdens on small charities. HM Revenue & Customs said it expected the scheme to be used largely by small charities making bucket collections and religious organisations taking collections.
The government expects charities to receive about £85m a year through the scheme.
Because there is no direct link between tax paid by a donor and the cash repaid to a charity, the scheme is considered to be public expenditure, not tax relief, and the government has therefore introduced a separate bill for the scheme rather than legislating for it in the Finance Bill.
An HM Revenue & Customs consultation on the details of the scheme began in March and will continue until 25 May.
To reduce the risk of fraud, HMRC said in the consultation, charities using the scheme would have to have a three-year record of successfully claiming Gift Aid and a good general tax record. They might also have to continue to make some claims under Gift Aid while claiming through the scheme.
The consultation covers potential rules to ensure that highly centralised charities with many local branches are not disadvantaged by the scheme. Similar organisations made up of independent local charities would be able to make many claims.
The rules would permit an additional allowance for organisations carrying out "meetings in a local community building", for collections carried out in that building.
This change is expected to particularly benefit centralised religious organisations such as the Roman Catholic Church.