A little-known change in tax rules may have led to hundreds of membership charities wrongly claiming gift aid for as long as a decade, tax experts say.
HM Revenue & Customs maintains a list of several thousand professional organisations whose members can treat their membership fees as tax deductible, known as List 3. It is not known how many of these bodies are charities. However a significant proportion are.
Normally charities can claim gift aid on membership fees, so long as the benefits of membership meet certain requirements. But for List 3 bodies, the tax deductible nature of membership fees means they cannot claim gift aid.
According to charity tax consultants, who asked not to be named, many List 3 charities are unaware of this, and are claiming tax relief. It is not known what sum of money may have been incorrectly claimed.
The problem dates back to 2007, when a change in the law meant that List 3 charities could no longer claim. It is believed that in some cases, charities have been wrongly claiming since that point.
Advisors said it was difficult to know how many charities were affected, or how long they had been claiming, but the problem still arose regularly.
One consultant said that HMRC was uncertain how to handle the situation because of the length of time and number of charities involved. The consultant said that one issue was a discrepancy between the handling of new registrants and existing bodies. The latter can often claim relief without realising they are breaking any rules.
An HMRC spokesman said: “Gift aid supports UK charities by allowing them to claim back tax paid on donations. However, not all charitable donations qualify for this scheme, and where we identify such ineligible payments HMRC will reject them."
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