The Small Charitable Donations Bill has been published today with amendments following consultation, but it still has a long way to go in making its benefits accessible to more charities according to the Charity Finance Group (CFG).
While there has been "some movement" in terms of some of the stricter regulations included in the Bill, CFG's head of policy, Jane Tully said the organisation still has concerns over the Bill's ability to extend the benefits of the scheme to all charities.
"There is a real danger that if the accessibility continues to be limited, significant proportions of the sector will be unable to benefit from the scheme including residential organisations such as hospices. Currently perceived risk of abuse of the scheme is mitigated by links to gift aid, making the scheme more akin to a reward scheme for charities that use gift aid effectively already," said Tully.
The Small Donations Bill, scheduled to be implemented in England next year, will introduce a gift aid-like match-fund available for small donations (those of £20 or less) on an annual basis. The scheme differs from gift aid in that it is not a tax relief measure, and is governed by a different set of rules.
Up to £1,250 will be available for the first £5,000 of charities' small donations per annum, and HMRC estimates that the programme will unlock around £100m of funding annually for charities by 2015-16.
During the consultation period for the Bill (which introduces the Gift Aid Small Donations Scheme) CFG, the National Council for Voluntary Organisations and the Charities Aid Foundation submitted joint recommendations for amendments. They advised that scheme is too complicated and that eligibility for the scheme is severely limited by restrictions designed to prevent fraud.
Restrictions include the requirement to have been registered with the HMRC for at least three consecutive tax years and to have made a gift aid claim in at least three of the last seven tax years. These restrictions remain upon publication today. Charity lawyers Stone King told civilsociety.co.uk that this was at great disadvantage to new charities and that it "would have liked the scheme to have had even greater application".
"There has also been some criticism that the new rules are quite complicated. However, hopefully in due course there will be helpful sector guidance to assist charities which are struggling with the detail," Hannah Kubie, an associate at Stone King said, adding that overall the firm was very pleased with the introduction of the Bill.
Changes to matching with gift aid welcomed
One change welcomed by Stone King, CFG and the Charity Tax Group (CTG), however, is the amendment of the scheme's 'matching' principle with gift aid. Prior to the publication of the Bill the system was to match a charity's allowance for claiming from the small charitable donations scheme to the value of donations claimed via the gift aid scheme on a 1:1 ratio. So if a charity had successfully processed £3,000 of donations through the gift aid scheme, it would be able to apply for a small charitable donations claim of up to £3,000. This ratio has now changed to a 2:1 ratio, with a limit of £5,000 per annum.
CTG agreed that the Bill remains "more complex than the sector had hoped", but said that the changes made "reflect HMRC's efforts to accommodate charities in the scheme irrespective of how they are structured". They point to further changes in the Bill that make clear that one charity need not be considered as connected to another unless their purposes and activities are the same - for instance if two charities share more than two trustees in common.
Tully advised that CFG will continue in its efforts to make the Bill more accessible to a greater number of charities, advising the group will soon be meeting with HMRC and the Treasury to discuss the Bill.