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Donating cars and Gift Aid

Donating cars and Gift Aid

Giveacar, the innovative organisation that provides a service for disposing of cars via auction or scrapping and donating the proceeds to charity, have launched a petition to the government to allow Gift Aid on these donations. Now whilst I commend and endorse any scheme which will promote and enhance Gift Aid – it is after all why I am in business – I am not sure that there is any change required to the Gift Aid regulations to provide for this.

One of the pillars of Gift Aid is that in order to qualify, a gift must be in cash. Whilst there are a few exceptions – primarily land and listed shares – this is essentially a historic situation, and HMRC would be reluctant to see any changes to this. But this is not really necessary as there are mechanisms to cope with this which are being implemented in operations such as charity shops and online auctions.

It would therefore not be too difficult for a similar scheme to be implemented with the sale/auction of donated goods in the shape of cars, and there would be no need for a change in the law or any real modifications to the existing function and procedure currently being employed.

The reality is that all that is required is a rather basic paper trail that could be inspected by HMRC in the event that they wished to carry out an audit to ensure that the rules and regulations are being complied with. In fact as more application of this have been implemented and technology has developed and improved, it has become far easier to maintain this audit trail, with less paper work and more automated tracking and recording.

Benefit to the donor

Perhaps the most attractive aspect of introducing such an application without any changes to the legislation is that there is a very real benefit to the donor in the shape of tax relief. As a commercial operation, Giveacar take a fee from the proceeds of the sale to cover the costs of providing their services. The donors, if a higher rate tax payer can claim tax relief of 25% of the value of their donation. Now whilst this does not quite equal to the fee charged by Giveacar it allows the donor to dispose of their car, make a donation to charity, and get a ‘bonus’ of tax relief through their tax return. Of course they could choose to make a further donation, or simply regard this as a ‘reward’ from the Government for supporting charity. Either way, it already exists and can be used as a tool for incentives the use of the Giveacar donation scheme.

Utilise what is already there

I started out by saying that I would not recommend applying to the Government or HMRC to change regulations. We have seen how the Government are in a complete spin with all the U-turns on granny tax, pies, caravans and capping. Governments are notoriously slow to change and a petition that only closes on 7th March 2013 is likely to be a long time in changing anything. Far better to utilise what is already there and acceptable than to try and introduce change or worse, new legislation.

So I would recommend that Giveacar focus on developing their operation to enable their supporters not simply to donate the car, but rather the proceeds of the car, and this way make their donation (and their old car) go just that little bit further.

DISCLAIMER The information and opinions contained article are provided in general terms only and GAIN and its employees take no responsibility for any actions you make take based on the information contained herein. You are advised to take professional advice before taking any action.

Barry Gower is Managing Director of GAIN (Gift Aid Recovery Consultants).

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