On 22nd October HMRC released a set of new and simplified model Gift Aid declaration forms, aimed at combatting the “tax gap”. Charities can use the old forms until 5 April 2016, but declarations signed from 6 April must be based on the new model declarations, as failure to do so may result in claims being invalid.

Charities, and those who work with charities, will doubtless be aware that many individuals will Gift Aid their donations without giving proper consideration as to whether they pay sufficient UK tax. This is in part due to a lack of understanding about the way that Gift Aid operates.

Usually HMRC will first repay the basic rate of tax claimed by the charity and then identify whether the relevant individual has paid enough tax. This can obviously lead to payments of Gift Aid in error – otherwise known as the “tax gap”. A report by the National Audit Office in November 2013 put the figure for payments in error at around £55m per year (“Gift Aid and reliefs on donations” report by the Comptroller and Auditor General, 21 November 2013).

In theory, HMRC’s principle route to recovering these sums is directly via individuals’ self-assessment returns. However, HMRC will often first ask the charity to voluntarily repay the Gift Aid received. Despite this, in many cases these sums must be written off.

HMRC have re-worded their model Gift Aid declaration forms in conjunction with the Charity Tax Group. The new model Gift Aid forms seek to clarify that individuals will be personally liable for the amount claimed by the charity where they pay insufficient tax. They are also intended generally to be simpler and easier to understand.

Commentary on the amendments suggests that the changes are welcome, and largely achieve the above objectives. However, the Charity Tax Group has suggested that the increased emphasis on personal liability of individuals to account for any shortfall may have a “chilling effect” on some donors.

Charities may continue to use the old model Gift Aid forms until 5 April 2016. However, from 6 April 2016 onwards any new declarations signed must be based on the new model declarations – failure to do so may result in claims being invalid. Individuals who have signed a declaration prior to this date do not need to sign a new declaration.

Charities should note that the model forms are intended to operate as a template, and that additional wording or branding can be incorporated.