The Treasury has launched a consultation on simplifying the Gift Aid donor benefit rules, including a proposal to drastically rewrite the rules governing the value of benefits donors can receive.
The consultation, which was published on the Treasury website last week, comes after the government promised in the Autumn Statement of 2014 to consider simplifying the existing Gift Aid donor benefit rules. A call for evidence also ran until October 2015 on how the current system works.
Gift Aid rules allow charities, within certain limits, to give benefits to donors – such as memorabilia or invitations to social events – as a way of saying thank you.
The general rules are: for donations of up to £100, the value of the benefit can equal 25 per cent of the donation; for those between £100 and £1,000, the value of the benefit is capped at £25; and for donations of more than £1,000, the value of the benefit can be worth 5 per cent of the donation, up to a maximum of £2,500.
The consultation proposes two possible reforms to these rules, known as the relevant value test, one of which is its complete removal.
The consultation document says removing the test would mean the net amount of donations on which Gift Aid can be claimed could be calculated by deducting the cost of providing donor benefits from a charity’s gross donation receipts.
The second proposal is to retain relevant value test thresholds but reduce their number from three to one. The threshold would be a percentage of a donation up to a prescribed maximum aggregate benefit value: for example, a 10 per cent threshold on all benefits up to an annual value of £2,500 would mean Gift Aid could be claimed on an entire £1,000 donation as long as the benefits given did not exceed £100.
The consultation also suggests disregarding benefits of low value from the donor benefit rules, which the consultation says would help smaller charities and mean that Gift Aid could be claimed on the gross value of a donation where the donor benefits did not exceed a certain monetary threshold, such as £3.
The lifetime benefits concession, which says that the value of lifetime benefits should be included in the total value of benefit given to the donor only in the first 10 years, could also be withdrawn, the consultation says.
The consultation document says that because this concession is rarely used by charities the government believes its withdrawal would further simplify the existing system.
The consultation runs until 12 May.