In February 2012, HMRC published amended guidance relating to the declarations donors must make if they want their donation to charity to benefit from Gift Aid. Two key changes arise from the guidance, relating to a charity’s obligation to keep records of the declarations and to the wording of the declaration itself. HMRC requires charities to comply with the revised requirements from 31 December 2012, so charities that have not done so should check their compliance now to ensure Gift Aid declarations made by donors are valid and that tax on the gifts can be reclaimed.

Record keeping

The revised guidance confirms that charities and Community Amateur Sports Clubs (CASCs), must retain their tax records (including Gift Aid declarations) until six years after the end of the accounting period to which they relate (or, in the case of charitable trusts, six years after the end of the tax year to which they relate, or 12 months after the trustees make their Gift Aid repayment claim for that tax year, whichever is the later).

The revision corrects an error in HMRC’s previous guidance on record-keeping, which stated that records should be kept for only four years. HMRC is aware that charities may have relied upon this earlier guidance, and have confirmed that they should not be prejudiced for having done so. Charities will not be penalised for records destroyed before January 2012 in reliance on the previous guidance.

Note that any enduring Gift Aid declaration will need to be kept permanently, as the charity will wish to continue to rely upon it.

Gift Aid declarations

HMRC also revised the information that must be given to a donor for their Gift Aid declaration to be valid. The revision requires every charity or CASC to advise the donor that s/he needs to pay at least as much UK income tax and/or capital gains tax for the year of the donation as the charity (or CASC) and any other charities or CASCs to which they donate will reclaim on their donations. Whilst it has always been the case that the donor must pay enough tax to cover all the donations they make under Gift Aid each year, the key change is that HMRC is now requiring that charities are able to show they have made this clear to the donor, so that the donor is making an informed declaration.

This information does not need to be stated in the declaration itself, as long as the charity has informed the donor of it in some way (for example by explaining it verbally). However, the charity/ CASC must be able to demonstrate to HMRC that it has provided the information to the donor; the simplest way to do this and to ensure the donor has the relevant information will usually be to incorporate it into their standard Gift Aid declaration.

HMRC has produced a range of updated model Gift Aid declarations which are compliant with the revised guidance, in addition to a helpful checklist setting out the minimum requirements for a declaration. These can all be accessed from the HMRC website.

Note that it is only in the case of new Gift Aid declarations, where a charity is updating an existing enduring declaration, that the new wording must be introduced. If a donor has already provided an enduring declaration based on the old wording, HMRC does not require the charity to obtain a

new declaration from the donor (provided the old declaration was compliant with the HMRC requirements in place at the time it was made). Charities may of course choose to update their existing enduring declarations if they wish.

The transition period during which charities were given leeway to amend their Gift Aid declaration forms expired at the end of 2012 and the revised requirements are now in effect. If a charity does not now comply, there is a real risk that the donor’s Gift Aid declaration will be declared invalid on a Gift Aid audit, resulting in a proportion of the charity’s Gift Aid claims being disallowed. If the charity has complied with their obligations but the donor has not paid sufficient tax to cover the basic rate tax on his/ her donations for the year, the charity will still be able to claim the Gift Aid, but HMRC may seek to recover additional tax from the donor.

Further clarification  

HMRC has also provided helpful clarification regarding the detailed information which charities/CASCs must obtain from a donor in a Gift Aid declaration. In particular, it has been confirmed that:

  • a first initial and full surname are sufficient for the donor’s name; and
  • a house number and postcode are sufficient for the donor’s address.

Where donations are made by website HMRC has provided guidance on what evidence they expect charities to obtain (eg a tickbox for the donor to confirm s/he has read the new statement).

Action

Charities which have not yet reviewed their declarations and processes should do so as a priority and plan how to make the necessary changes with minimal cost and disruption. If any declarations are not compliant with the HMRC requirements, they should be changed immediately. Charities may also wish to insert something into their regular mailshots to remind donors about the need to have paid enough tax to cover the tax reclaimed on their donations.