The gift aid small donations scheme (GASDS) has, since 6 April 2013, enabled charities and community amateur sports clubs (CASCs) to claim a top-up payment, similar to gift aid, on small donations up to a specified limit without the donor having to make a gift aid declaration or even to be a UK taxpayer. Following representations from charities and CASCs the scheme has undergone significant changes since 2013 but, despite this, eligible organisations are claiming far less than the £100 million per year anticipated by the government when the scheme started. In 2017/18, the amount claimed was only £30 million – which is not peanuts, but it could be more.
One of the most significant changes is that, since 6 April 2016, the maximum amount of small donations on which a GASDS top-up payment can be claimed in a tax year is £8,000 rather than the original £5,000. With basic rate tax remaining 20%, the maximum top-up that can be claimed is £2,000 rather than the original £1,250.
From 6 April 2019, the maximum small donation on which a top-up can be claimed is increased from the original £20 to £30. But the total amount on which the top-up can be claimed remains £8,000.
GASDS was simplified in April 2017, making it easier for smaller and newer organisations to claim. The rules requiring the charity to be recognised by HMRC or the CASC to be registered with HMRC for at least two full tax years, and to have successfully claimed ordinary gift aid in at least two of the previous four years, were removed. But the GASDS top-up is still capped at 10 times the amount of ordinary gift aid claimed in the tax year – so to claim the maximum £2,000 top-up on £8,000 GASDS donations, the organisation must claim at least £200 on £800 ordinary gift aid donations. This requirement limits GASDS participation for very small charities/CASCs which receive many small donations but few ordinary gift aid donations. An independent charity tax commission recommended in July this year that the government explore removing this cap.
Also from 6 April 2017, GASDS covers not only cash donations but also donations made by contactless payment (by card, mobile phone or other device with the donor present). But it still doesn’t include donations made by text message, cheque, debit/credit card or bank transfer. This is because GASDS is not intended to be a substitute for gift aid, and charities/CASCs would be expected to obtain gift aid declarations for donations made by these methods.
Most other rules in relation to small donations remain unchanged. In particular the full amount of a small donation has to be used for charitable purposes, and cannot be a membership fee. If the charity’s/CASC’s managers do not know whether the gift is £20 or less, it is eligible for the scheme only if they have taken reasonable steps to find out. The donation must be made in the UK, and if in cash must be deposited in a bank account or other allowed account in the UK. The donor, if known, must not have made a gift aid declaration that would cover the donation, such as a permanent (enduring) declaration that continues until the donor cancels it. The donation must not be made under the payroll deduction scheme, or be tax deductible for the donor, or be subject to repayment, or be connected with any arrangement under which the charity will acquire property from the donor or a person connected with the donor. And finally, there must be no benefits associated with the gift, or any benefits associated with the gift must be of negligible value (for example, a lapel sticker designed to acknowledge the donation, or coffee and a cake for a person making a donation at a coffee morning).
The rule that GASDS claims can only be made for two tax years after the year in which the donation was received still remains.
Since 6 April 2017 revised GASDS rules apply to charities that run primary purpose charitable activities in a community building on at least six occasions during the tax year, each involving at least 10 beneficiaries taking part in the activity, and with no charge to enter the building or part of the building where the charitable activities take place. For each community building to which this applies, a charity can claim top-up on small donations, to a maximum of £8,000, made at the community building and/or in the same local authority area as the building. Alternatively, instead of making a separate GASDS claim for each community building (each potentially up to the maximum) the charity can choose to make a single GASDS claim on small donations to a maximum of £8,000 received anywhere in the UK. For a charity with only one eligible community building, a claim covering donations made anywhere in the UK may be more advantageous than a claim only on donations made at the community building or in the same local authority area.
“Community building” means a building such as a village hall, community centre, town hall, place of worship etc, or those parts of it, to which the public or a section of the public have access at some or all times. It does not include any parts of a building used wholly or mainly for residential purposes or the supply of goods. It also does not include any parts of a building that are used wholly or mainly for other commercial purposes, unless a charity is carrying out a charitable activity in those parts, and the parts are available for use exclusively by the charity in carrying out the activity.
The community building rules are explained in HMRC’s GASDS guidance as are the rules where two or more charities/CASCs are connected in a tax year and at least one of the connected charities (but not a CASC) runs charitable activities in a community building.