Charities are about to find it harder to maintain their Gift Aid income. From 5 April 2011 the Transitional Tax Relief on donations by Gift Aid will come to an end.
The Transitional Tax Relief was introduced in the 2008 Budget for three years to help charities adjust to the reduction in the basic tax rate from 22% to 20%, and the resultant reduction in the value of Gift Aid available on donations. This meant that for every pound donated under the Gift Aid scheme charities would continue to receive 28p. This is in fact made up of ‘pure ‘ Gift Aid calculated at 25%, and an additional ‘present’ (paid for by the Treasury) of 3%, making a total of 28%.
But from 5 April 2011, charities will receive 25p tax back on every £1 donation by Gift Aid.
Gift Aid expert Barry Gower says: “from that date Gift Aid will be worth 3% less or an effective reduction of 10.7% in the value of Gift Aid you can claim”.
Of course, most charities will have been aware of this and planned ahead. But it won’t change the fact that charities will have to work harder just to maintain their current level of Gift Aid reclaims.
There is a further complication in that Transitional Relief is only payable (for charitable companies or CASCs), up to two years from the end of the accounting period to which it relates. Charities should therefore ensure that they get their claims in for donations made in the 2008-2011 period as soon as possible and not rely on the normal assumption that Gift Aid can be claimed back for four years from the end of the accounting period to which it relates.
In addition, charities should ensure that their literature is reviewed to reflect the fact that Gift Aid is now worth 25% and not 28%.
UK Fundraising has run several training courses with Barry Gower over the last few years. Given the significance of the end of Transitional Tax Relief, we’re running another one, on the very day that the new lower rates kick in.
The half-day course aims to give charities a full understanding of Gift Aid. and to give charities some ideas for alternative ways that they can make up this loss, using existing Gift Aid regulations.
The course takes place at the King’s Cross Hub in London on 6 April 2011 in the afternoon.
Getting Gift Aid right matters, and there are many aspects to doing so. Just last week the Charity Tax Group reported that the cost of claiming Gift Aid varied widely amongst charities from 70p per £ of Gift Aid claimed (York Diocese and Board of Finance) to the RSPB’s 4p per £, and the National Trust’s 1p per £. Indeed, the report’s author believes that the costs for smaller charities that were not part of their research could be even higher than the 70p.
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