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New charity shop gift aid rules will cut red tape

New charity shop gift aid rules will cut red tape
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New charity shop gift aid rules will cut red tape2

Finance | Tania Mason | 20 Dec 2012

HMRC is to introduce new rules that will dramatically reduce the numbers of letters that charities must send to donors in order to claim gift aid on their donations to charity shops.

From next April, in each tax year, donors will be able to make a single gift aid declaration that covers sale proceeds from donations of up to £100 if the charity operates the shop directly, or £1,000 if the goods are sold by a trading subsidiary.  Donors will only need to be contacted by the charity again if income from the sale of their donated goods exceeds those amounts.

At the moment, charities must write to each donor to confirm their gift aid eligibility, every time a donated item is sold.

Charity Tax Group welcomed the announcement, saying the reduction in administration could save large charities something like £250,000 a year.

The announcement came about as a result of work carried out by an HMRC working group comprising representatives from the charity retail sector, charity tax bodies and the government.  CTG vice chairman Richard Bray said discussions were “productive and constructive” and there was “significant agreement between charities and officials”.

CTG wrote to the Economic Secretary to the Treasury earlier this month, requesting that he approve the proposal, and Bray said CTG appreciated his prompt and favourable response.

He said the move will “dramatically reduce” the number of notification letters charities will need to write to donors.

CFG chief executive Caron Bradshaw said it was “a really good step in the right direction” and added: “We hope that this consultative approach could work as a potential model for streamlining and modernising the wider gift aid system.”

Warren Alexander, chief executive of the Charity Retail Association, also welcomed the move, saying he was delighted that the governement has moved so quickly. 

"We will be working with HMRC and our members on the final details, and on ensuring that charities understand what they need to do to take advantage of the new processes and comply with HMRC requirements," he added. 

HMRC will publish detailed guidance on the new procedures in the new year.

Barry Gower
Director
GAIN Gift Aid Consultants
4 Jan 2013

I would like to think that if a donor gave an amount, regardless of whether it was as a result of the sale of goods in a charity shop, or any other method, that the charity would acknowledged this and thank them. Although the details are not finalised, the charity would need to keep records of this type of donation , if only to ensure that the amount did not exceed the maximum (£100 or £1000). Then, at the end of that tax year, the charity writes to the donor, thanks them and advises of the cumulative amount that has been donated in that tax year, and encourages the donor to include this amount on their tax return.

Note that they do not have to tell the charity anything regarding their tax status, and they do not even have to know whether or not they are higher rate tax payers. The tax system will work this out and if it turns out that they fall into this bracket, they will automatically get this as tax relief!

Valerie Morton
20 Dec 2012

So, how will this affect higher rate tax payers who curently claim higher rate tax relief on the value of sales from their donated goods? If they are not informed of the exact amount of their sales they will not be able to claim the relief. If they have to tell charities they are HRT payers it may act as a disincentive.

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