Gift Aid Small Donations Scheme

In his Budget speech on 23 March 2011 the then Chancellor George Osborne announced a number of measures to encourage charitable giving, including a new scheme to allow charities to obtain a top-up payment on small cash donations equivalent to the tax relief they claim on donations made under Gift Aid.[1] Under the scheme, to be introduced in April 2013, charities would be entitled to claim top-up payments on small donations totalling up to £5,000 a year.[2] After informal discussions with the charitable sector, in the 2012 Budget the Government confirmed that the new scheme would allow charities to claim a Gift Aid style top-up payment on cash donations of £20 or less.[3]

The scheme is not a tax relief so legislation to introduce it was made separately to the annual Finance Bill. The Small Charitable Donations Bill 2012-13 was published on 21 June 2012. The Bill completed its scrutiny in the Commons on 26 November 2012, when the Government made some changes to the eligibility rules, to make it easier for small charities to use the scheme.[4] Following the passage of the Bill, the Gift Aid Small Donations Scheme (GASDS) was launched in April 2013. Subsequently the annual limit for donations was increased to £8,000 from April 2016.[5] Guidance for charities using the scheme is on Gov.uk.

The Act sets a number of rules for eligible charities and qualifying payments, to minimise the risk of fraud and to provide a link with Gift Aid: setting standards for a charity’s compliance behaviour, and, capping the size of a charity’s annual claim under GASDS by reference to its annual claim under Gift Aid (the ‘matching rule’). In addition, a charity that is connected with one or more other charities has to share the annual £5,000 main allowance. Finally, the scheme allows a charity to make an additional claim in respect of donations it has raised as part of its charitable activities in a community building – such as a village hall, town hall or place of worship. The aim of these rules is to allow ‘groups’ of charities to claim equivalent amounts if they are structured in different ways. As a consequence national organisations, like dominations of churches, may claim similar amounts whether they are structured as a single charity nationally, or as a ‘group’ structure made up of individual charities.

When the GASDS was introduced the Government said that it would review its operation after three years. Following a call for evidence from stakeholders, in April 2016 the Government published some proposals for reform.[6] In August that year the Government confirmed that responses had been ‘generally positive’, and it would legislate to simplify the compliance criteria, and to relax the community building rules, though in future charities would be entitled to a top-up payment for donations raised in eligible community buildings or for donations under the single main allowance, not for both. In addition, GASDS would be extended to include donations made by ‘contactless payments’.[7] Primary legislation to make these reforms was introduced in September, and received Royal Assent in January 2017.[8] In turn these changes took effect from 6 April 2017.

At the time HMRC estimated that the provisions to simplify GASDS “could benefit up to 71,000 charities that currently claim Gift Aid.” Restricting charities’ claims to either the main allowance or community buildings allowance was estimated to impact “up to 3,000 charities.”[9] Overall the changes made to GASDS were estimated to cost £10m in 2018/19, rising to £20m by 2021/22.[10]

Since being introduced the annual cost of the GASDS has risen from 10m in 2013/14 to £30m in 2017/18.[11] By comparison the cost of tax repayments to charities under Gift Aid is estimated to be £1.26bn in 2017/18.[12]

In the 2018 Budget the Government announced a number of measures to reduce charities’ administrative burdens, including an increase in the GASDS individual donation limit from £20 to £30 at an annual Exchequer cost of £5m.[13] Statutory provision to set the new limit is to be made by secondary legislation, and is to take effect from April 2019.[14]

Notes :

[1] HC Deb 23 March 2011 c962

[2] Budget 2011, HC 836 March 2011 para 2.113

[3] Budget 2012, HC 1853 March 2012 para 2.88. Further details were published in a consultation document: HMRC, The Gift Aid Small Donations Scheme, March 2012

[4] HC Deb 26 November 2012 cc 68-112, The Bill, explanatory notes and details of its scrutiny are collated on its Bill page.

[5] Budget 2015, HC 1093, March 2015 para 2.104 This change was made by Order: SI 2015/2027.

[6] Gift Aid Small Donations Scheme consultation, 20 April 2016. Responses were invited by 1 July 2016.

[7] HMRC, Gift Aid Small Donations Scheme – summary of responses, 10 August 2016

[8] The text of this Bill, explanatory notes on its provisions, and details of its Parliamentary scrutiny are collated on its Parliament page. A short Library paper has further details: Small Charitable Donations and Childcare Payments Act 2017, CBP7711, 17 January 2017.

[9] HMRC, Small Charitable Donations and Childcare Payments Bill: Impact Assessment, September 2016

[10] Spring Budget 2017, HC 1025, March 2017 p28 (Table 2.2 – item s)

[11] HMRC, National Statistics: UK charities – tax relief (Table 2), July 2018

[12] HMRC, National Statistics: UK Gift Aid and covenants (Table 3), July 2018

[13] Budget 2018, HC 1629, October 2018 para 3.16; Table 2.1 – item 67

[14] HMRC, Gift Aid Small Donations Scheme – tax information & impact note, 29 October 2018