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.