Gift Aid administration headache
HMRC has confirmed that charities should have updated their Gift Aid statements and calculations from 6 April 2008 to reflect the drop in the basic rate of income tax to 20 per cent.
This means reclaiming Gift Aid at 25 per cent rather than what was 28 per cent until 5 April. The transitional relief highlighted in the recent Budget will be applied by HMRC automatically at the rate of 3p for every £1 Gift Aid donation made to charities between 6 April 2008 and 5 April 2011. Charities must make their Gift Aid repayment claim within two years of the end of the accounting period or tax year to which the claim relates to receive this transitional relief.
Keith Hickey, CEO of CFDG, told Caritas: ‘Whilst we are pleased that the government has introduced transitional relief, it is just a shame that this was not announced in last year’s Budget and that the transitional relief will be paid by a separate top-up fund. The former will have cost the sector money in its fundraising materials and the latter will cost money in updating accounting and fundraising systems to cope with one income stream based on a Gift Aid claim at the basic rate of tax at 20p and a second income stream for the transitional relief.’
In the tax year 2006-07 £2.94bn was donated through Gift Aid delivering a gross income to the sector of £3.7bn, according to HMRC records. See also www.hmrc.gov.uk/ budget2008/master-notes.pdf, page 129
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