The Small Charitable Donations and Childcare Payments Act 2017 makes a number of amendments to the legislation which underpins the Gift Aid Small Donations Scheme (GASDS), introduced in April 2013. The purpose of these changes is to simplify the scheme and extend access to smaller and newer charities. The Act also makes a few technical amendments to the legislation which establishes Tax-Free Childcare, the Government’s scheme to support parents’ childcare costs, scheduled to be rolled out from early 2017.Jump to full report >>
The Small Charitable Donations and Childcare Payments Act 2017 makes a number of amendments to the legislation which underpins the Gift Aid Small Donations Scheme (GASDS), introduced in April 2013. The purpose of these changes is to simplify the scheme and extend access to smaller and newer charities. The Act also makes a few technical amendments to the legislation which establishes Tax-Free Childcare, the Government’s scheme to support parents’ childcare costs, scheduled to be rolled out from early 2017.
Under Gift Aid charities are entitled to claim 25p tax on each £1 they receive from individual donations. This represents repayment of the basic rate tax that donors have paid on this part of their income. Individuals who are higher or additional rate taxpayers claim the extra tax they will have paid from HM Revenue & Customs (HMRC). To support any Gift Aid claim, charities must have a Gift Aid declaration from the donor, confirming they have paid the same amount or more in tax in that year. If a donation has not been made out of taxed income, tax has to be paid by the donor to HMRC. Clearly those donors who are not earning enough to be paying income tax will not want to use Gift Aid. There will also be circumstances where charities may find it difficult to get a declaration from donors – say, when collecting small cash gifts in a collecting tin. The GASDS allows charities to claim a top-up payment on donations equivalent to Gift Aid in these situations.
In the 2011 Budget the then Chancellor George Osborne announced “a new scheme where Gift Aid can be claimed on small donations, up to a total of £5,000 a year per charity, without the need for donors to fill in any forms at all. This means Gift Aid on the contents of the collecting tin and the street bucket, and 100,000 charities will benefit to the tune of £240m.” Statutory provision for the GASDS was made by the Small Charitable Donations Act 2012. As there is no link to the tax paid by the donor, the GASDS is not tax relief but is treated as public expenditure; this is why the legislation to establish the scheme was not included in the annual Finance Bill.
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.
Only cash donations of up to £20 may qualify for a top-up payment. This limit remains in force, although the annual ‘main allowance’ for donations was increased to £8,000 from April 2016.
Consultation on reforming the scheme
At the time of its launch in 2013 the Government said that it would review the operation of GASDS after three years. Following a call for evidence from stakeholders, in April 2016 the Government published proposals for reforming the scheme. In August 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. Finally, GASDS would be extended to include donations made by ‘contactless payments’. These changes would take effect from 6 April 2017.
HMRC has published an impact assessment on these reforms: this estimates that the measures 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 is estimated to impact “up to 3,000 charities.” Overall the changes are anticipated to “decrease receipts by approximately £15m per annum.”
In the Queen’s Speech on 18 May 2016 the Government confirmed that it would introduce legislation in the 2016-17 Session to reform GASDS “to ensure it supports the maximum number of charities and donations possible.”
The Small Charitable Donations and Childcare Payments Bill (Bill 68 of 2016-17) was published on 14 September. The Bill is short, with 9 clauses. It extends to the whole of the UK. The text of the Bill, explanatory notes on its provisions, and details of its Parliamentary scrutiny are collated on its Parliament page.
The Bill was given a Second Reading on 11 October, and was considered in Public Bill Committee over a single sitting on 18 October. The Government did not table any amendments to the Bill, and the Bill was agreed without amendment. The Bill was not amended on Report, and has completed its scrutiny in the Lords, again without amendment. It received Royal Assent on 16 January 2017.
 Donors need to confirm that they had paid, or will have paid, income tax and/or capital gains tax of at least the amount of Gift Aid that the organisation will claim on their donation in any given tax year. For details see, HMRC, Gift Aid declarations: claiming tax back on donations, January 2016.
 For more guidance see, HMRC, Claiming a top-up payment on small charitable donations, March 2016.
 HMRC, Gift Aid Small Donations Scheme – summary of responses, 10 August 2016
 HMRC, Small Charitable Donations and Childcare Payments Bill: Impact Assessment, September 2016 p2, p6. The Autumn Statement estimates this measure will cost £10m in 2018/19, rising to £20m by 2021/22 (Autumn Statement, Cm 9362, November 2016 Table 2.1 – item 40).