The UK Budget and donor benefit rules for charities

Emily Deane TEPThree years ago, the UK government’s Autumn Statement 2014 announced a review of the Gift Aid donor benefit rules with the intention of simplifying them. Following a call for evidence, it launched a consultation on 18 February 2016 setting out a range of options.

The responses helped develop specific proposals for reform, which were set out in a second consultation that ended on 3 February 2017. We have been informed that a summary of responses to the second consultation will be published on 1 December 2017.

This week the government announced that it would replace the current three-tier thresholds with two tiers. Under this reform, donors will be no worse off in terms of the value of benefits that charities can offer them, as the new limits will be, for every eligible donation, at least as generous as the current limit.

Current system

The current donor benefit limits (the relevant value test) is a set of monetary thresholds that determines the value of benefits that charities may give to donors as a consequence of a donation and still claim Gift Aid on that donation. These are:

• For donations up to £100, the value of the benefit can equate to a total of 25% of the donation.
• For donations between £100 and £1,000, the value of benefits is capped at £25.
• For donations over £1,000, the value of the benefit can equate to a total of 5% of the donation, up to a maximum annual benefit value of £2,500.

New system to be introduced

Under the new limits, the benefit threshold for the first £100 of the donation will remain at 25% of the amount of the donation. For larger donations, charities can offer an additional benefit to donors, up to 5% of the amount of the donation that exceeds £100. Some examples are provided in the table below. The total value of the benefit that a donor can receive remains at £2,500.

Extra statutory concessions

The government also announced that it will bring into legislation the four extra statutory concessions that currently operate in relation to the donor benefit rules.

Time-frame

Legislation to make all the changes will be introduced in Finance Bill 2018-2019 and will come into effect from 6 April 2019. Draft legislation will be published in 2018.

Examples of how the new benefit thresholds will work:

Size of donation (£) Existing relevant value test  – size of donation
determines level of benefit (£)
Planned relevant value test from April 2019 (£)
70 17.50 17.50
100 25 25
400 25 40 (25% of 100 (25) plus 5% of 400-100(15))
1,000 25 70 (25% of 100 (25) plus 5% of 1,000-100(45))
1,500 75 95 (25% of 100 (25) plus 5% of 1,500-100 (70))

STEP will continue to liaise with HMRC’s Charities Tax Team in this connection.

Emily Deane TEP is STEP Technical Counsel