HMRC has published the results of its consultation into Gift Aid rules and launched a further consultation, ending on 3rd February 2017.
The government received 61 responses to its consultation, which set out its proposals for the simplification of Gift Aid rules: the removal of monetary thresholds altogether or reducing the number of thresholds.
However, the consultation failed to deliver a clear consensus around any single reform proposal. As a result, the government has stated that it does not believe that it would be right to proceed with implementing any of the reforms proposed at this stage. As such, it has developed a further set of reform proposals aimed, it says, ‘at reflecting more specifically the preferences and concerns expressed by respondents’, and has raised further questions under the new consultation.
The initial consultation revealed a majority disagreement with the proposal for removing the thresholds altogether.
Respondents felt that calculating a ‘net’ amount of donations on which Gift Aid could be claimed instead would not simplify the rules. Comments and concerns regarding this proposal included that the process for notifying donors of the amount of Gift Aid claimed in respect of their donation was not clear, and the process appeared administratively complex. Nearly half of all respondents questioned whether donors would be able to calculate how much of their gift would be eligible for Gift Aid when completing a Gift Aid declaration.
The proposal for extending the split payments approach and removing the relevant value test and aggregate value test was also not welcomed by the majority with more than half disagreeing that this would simplify the rules.
More than half of respondents explicitly said that removing the monetary thresholds altogether and replacing them with an alternative would not mitigate the administrative burden on charities.
Reducing the number of thresholds from three to one received more support, with nearly twice as many respondents feeling that this would be a simplification as those who disagreed; however the majority of respondents did not express a clear preference. More than a third of respondents also said that a single percentage would disadvantage those charities that are heavily reliant on small donations.
There was also significant support for moving to a percentage-based threshold system, with almost three-quarters of respondents supporting this proposal. However, support here was tempered hy a number of caveats including the level at which the threshold should be set and the methods used to value benefits.
However, overall the responses showed that while both proposals received some support, the weight of opinion is against either of them being welcomed as simplifications.
The new consultation seeks views on the following questions:
- Would any, or all, of the three relevant value reforms – three thresholds with an adjustment to the upper limit for the £25 threshold, two thresholds operating to a ‘sliced’, or cumulative, design, or a single threshold – represent a useful simplification of the current thresholds? If so, which one(s)? Please explain why.
- Which of these relevant value reforms do you consider would be simplest for the charity sector overall? Please explain your reasons.
- Would you consider a low value disregard a welcome simplification if the government does not move to a single threshold but instead either retains three thresholds or moves to a two threshold system? Please explain your answer. In your opinion, what is the minimum level at which a low value disregard would be useful to charities? Please give reasons for your answer.
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