Changes to the model Gift Aid declarations
HMRC has issued new, amended model Gift Aid declarations. If a charity currently uses the HMRC model Gift Aid declarations then it should start the process now to change over to the new declarations. If a charity currently uses bespoke Gift Aid declarations then it should consider seeking professional advice about the changes that should be considered.
It is each charity’s responsibility to ensure that all of its Gift Aid declarations are compliant, even if it uses third parties to provide fundraising services. All declarations need to be reviewed, whether contained in printed materials, online materials or fundraising scripts and including those used by any organisations to which a charity has outsourced fundraising functions. This will range from direct mail companies to online donation portals.
What if you do nothing
All Gift Aid declarations based on the previous 2012 HMRC models will be valid until 5 April 2016. If after 5 April 2016 a charity does not use the new model Gift Aid declarations in respect of new donations then HMRC may challenge that charity’s Gift Aid claims. This could cause cashflow disruption to the charity even if its declarations are eventually found to be compliant with the relevant law.
Gift Aid declarations made before 5 April 2016 which relate to future donations will continue to be valid (if they were valid when they were made). A charity does not have to renew any enduring Gift Aid declarations that it holds as a result of the new models. It must, of course, ensure that it continues to store these declarations indefinitely if it wishes to be able to rely on them in the future.
Mandatory information
The new HMRC models are not mandatory. The HMRC models have always been optional and many charities use their own declarations instead. If they do, their declarations must contain the following minimum information:
- Name of charity.
- Donor’s initial(s) and surname.
- First line/house number and post code of donor’s home address.
- A statement that the donor wishes the charity to claim Gift Aid on the donation.
- A statement that the donor needs to pay the same amount or more of income tax and/or capital gains tax as charities and Community Amateur Sports Clubs (CASCs) will claim on the donor’s gifts in the tax year.
- A statement that the donor is liable for any shortfall if the above statement is incorrect.
- The date of the declaration.
- If applicable, a statement that the declaration covers past or future donations.
- If the declaration is embedded in a sponsorship form it must also include the amount of donations collected, the date on which pledged donations were collected and the date when sums collected were paid to the charity.
Advantages with the HMRC models
The HMRC model is compliant with the law and charities should not normally deviate from it without professional advice. HMRC says that if you use its template “you can be sure that declarations will meet HMRC’s requirements”.
If a charity uses declarations that are not compliant with the law then HMRC may decide that its Gift Aid claims are invalid and require it to repay any historic claims it made based on those non-compliant declarations.
If a charity uses declarations that do not follow HMRC’s new requirements then it may still be compliant with the law. The risk is that HMRC could dispute this or allege that donors didn’t understand the declaration. This could be prompted, for example, if it was discovered that a donor completed the Gift Aid declaration when they were not eligible. If it was a one-off occurrence or clearly the fault of the donor then HMRC will claim the wrongly paid tax back from that person.
However, if there are multiple incidences of this at a charity or if HMRC thought that the language was not clear enough then it might suspend or refuse that charity’s Gift Aid claims and seek repayment of past claims.
Background to the changes
Prior to 2012 Gift Aid declarations required donors to confirm that they were a UK tax payer. HMRC was concerned that donors were making Gift Aid declarations when they had not paid sufficient income tax and capital gains tax to cover all of the donations made under their annual declarations. It produced new longer model Gift Aid declarations and issued guidance to prompt charities to change their declarations.
These changes were introduced in a hurried manner leading to confusion, especially as HMRC initially failed to provide for a transition period as charities moved to the new declarations (guidance and a transitional period were subsequently introduced).
The model declarations introduced in 2012 confusingly included statements that taxes such as VAT and Council Tax did not count towards the donor’s tax payments for the purposes of assessing their eligibility to make the declaration. By listing two taxes which did count and two which did not, it was not as clear as it should have been for donors about how to treat other taxes which were not listed.
Donors who paid taxes such as inheritance tax, National Insurance contributions or Vehicle Exercise Duty were sometimes unclear as to whether or not those payments counted towards their tax paid in the relevant tax year for Gift Aid purposes.
The 2012 model declarations also referred to donations that a donor had made to all charities and Community Amateur Sports Clubs in the relevant year. Many donors who completed these declarations did not know what a CASC was, or why it featured on their declaration. This requirement contributed to an unwieldy declaration that was difficult to understand and too long and dense to be considered worth reading by some donors.
The changes
The new declarations are simpler, clearer and shorter. The effectiveness of the declarations depends on them being read and understood by donors, and so these changes are welcome.
More controversially, perhaps, the new declarations include the following statement emphasising the personal liability of the donor for making declarations when they are not eligible:
“I am a UK taxpayer and understand that if I pay less income tax and/or capital gains tax in the current tax year than the amount of Gift Aid claimed on all my donations it is my responsibility to pay any difference.”
This is aimed to address HMRC concerns that donors were deliberately or recklessly making improper declarations. This inclusion has led to some concern that the new declaration will be off-putting for risk averse donors. However, the statement does reflect the underlying law and so, no matter how supportive the Government may be of enabling fuller take up of Gift Aid, it is hard to conceive that HMRC will be persuaded to remove the new “responsibility” element of the declaration in the immediate future.
The model declarations contain the optional phrase: “Boost your donations by 25p of Gift Aid for every £1 you donate." It is commonly used by charities already and HMRC research suggests it will increase the likelihood of donors opting in to Gift Aid. It is not a mandatory part of the HMRC model and can be omitted if desired without endangering the validity of a charity’s declarations.
The new models
The three old models have now been replaced by five model declarations covering:
The model Gift Aid declaration for past, present and future donations has been replaced by a new declaration for “multiple donations”. The donor no longer needs to tick the relevant box(es) to indicate that their declaration covers past, present or future donations. Instead, the multiple donation form has the same single opt-in box as the single donation form with wording to make clear that it applies to past and future donations too. This minimises the risk of accidentally ticking or failing to tick the correct boxes. The four year limit on Gift Aid claims for past donations remains unchanged.
The need for storage
The underlying law has not changed, and so charities need to continue to require donors to positively opt in to all Gift Aid declarations, and charities must continue to retain copies of those declarations, or the written confirmation letters of verbal declarations. These must be kept in case of an HMRC audit and to comply with any statutory, constitutional or accounting requirements governing document retention.
Welcome clarity
The new models bring welcome clarity to the model Gift Ad declarations which many had found cumbersome and confusing since the 2012 changes. Every charity which has not already done so should review their declarations to ensure they are compliant, especially before HMRC’s 5 April 2016 deadline. Even those charities which have bespoke declarations should consider whether they could benefit from copying some or all of the changes to the wording of the HMRC declaration.
