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No change in how to claim gift aid, says HMRC

Fundraising | Gemma Ware | 1 Mar 2008

HMRC has sought to dispel confusion over the way that the transitional gift aid relief announced in last week’s Budget will be paid, by reassuring charities that they will not have to do anything different in the way they submit claims.

In his Budget the Chancellor, Alastair Darling, announced that charities would be able to receive gift aid at 28p per £1 until 2011 through the introduction of transitional relief that would stave off the impact of the 2 per cent drop in income tax on 6 April.

While gift aid remains linked to the rate of income tax, and will therefore fall from 22 per cent to 20 per cent on 6 April, HMRC will now top this up with the transitional relief, so effectively charities will still receive gift aid payments at 22 per cent.

The announcement led to some confusion over whether charities would have to calculate the transitional rate themselves in their gift aid claims; however HMRC has confirmed that charities will have to do nothing new, because the government will pay out gift aid and the top-up at the same time.

However, the transitional relief is not due to kick in until late July when the Chancellor’s Finance Bill and the Appropriations Bill, which releases the extra money for the relief, are expected to receive Royal Assent. But HMRC has confirmed that any gift aid claims made in the interim will be backdated to the charity.

“Where gift aid repayment claims for donations made between 6 April 2008 and Royal Assent are allowed by HMRC, we will make the gift aid payments as usual and pay the transitional relief related to these claims as soon as possible after Royal Assent,” said an HMRC spokeswoman.

Charles Bagnall, consultant at IRIS, said a number of charity clients had been confused about the effects of the changes.

One charity was worried that it would have to alter the wording on fundraising leaflets that said it claimed gift aid at the current basic rate of tax to flag up that it was getting the 2 per cent transitional relief. It will not, as it will effectively still be claiming at the current rate of tax.

However, Megan Pacey, director of policy and campaigns at the Institute of Fundraising, said while she was waiting for clarification from HMRC on the best line charities should now use to describe gift aid in their fundraising appeals, the Institute had seen “no sense of panic” from charities over how to claim the transitional relief.

Pacey also said she did not think the change would cause donors much confusion. “It’s still 28p. I don’t think most donors are going to be bothered that 25p is tax relief and 3p is spend from government.”

Meanwhile, charities have rushed to praise the government for awarding the transitional relief on gift aid. ActionAid said it would generate an extra £2.5m for the charity, Oxfam said it was worth £6m, while the Church of England said it would bring in £24m.

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