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Gift Aid is eligible on unclaimed refunds and loan repayments, HMRC confirms

07 May 2021 News

Charities will be able to claim Gift Aid on waived refunds or loan payments, under amended rules announced this week.

Temporary concessions allowing charities to claim Gift Aid when supporters waived repayments for cancelled events were introduced at the beginning of the coronavirus crisis.

The Charity Tax Group (CTG), which has been pushing for the reforms since April last year, said that they were a “practical solution” to help charities manage financial challenges resulting from Covid-19.

Record of waiver needed

Under the new rules, if an individual chooses not to claim a refund after paying to attend a charity event which was subsequently cancelled, the value of that refund will be treated as a donation and will therefore be eligible for Gift Aid.

The same will be applied if an individual makes a loan to a charity and waives repayment.

The new guidance said: “HMRC will consider donations made from a waiver of a right to either a refund or loan repayment to be eligible for Gift Aid. 

“This is provided there is a record of a formal waiver held by the charity and all other Gift Aid rules are met. 

“The donation will be considered to have been made at the date of the waiver and not the date of the original payment. 

“A Gift Aid declaration will need to be collected by the charity if one is not already held for the donor.”

Charities must explain options

HMRC said that an “auditable record of correspondence”, such as emails between the charity and donor, would be required to claim Gift Aid where the refund related to relatively small amounts like “a couple of tickets to a fundraising event”.

Larger amounts of money, like loan repayments, would require a “legally enforceable document”, HMRC said, which should include details of what is being waived and written evidence that this should now be treated as a donation for Gift Aid.

HMRC also told charities that they were expected in all cases to explain the options available to donors and that individuals “must positively choose to waive their right”.

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