Meet our Expert
Lizzie joined Farrer & Co as a solicitor in 2007, after training at Baker & McKenzie. Lizzie advises sponsors of new charities, directors, trustees and officers of existing charities and other not-for-profit bodies, as well as individuals and companies wishing to make charitable gifts or do business with charities.
“What is the Gift Aid Small Donations Scheme (GASDS) and how may it help my charity?”
From April 2013 charities can claim a top-up payment on small donations. The top-
up will be similar to gift aid but no gift aid declarations will be required. For those
charities that raise money through collecting tins or that otherwise collect money
where it is difficult to obtain gift aid declarations (such as churches collecting money
during a service) the GASDS will be an opportunity to claim a top-up payment of up
to £1,250 each year (and some charities that run community buildings may be able to
The GASDS will only be open to charities that have been registered with HMRC
for at least 2 complete tax years and that have a successful history in making gift aid
claims in at least 2 of the last 4 years (and do not have a gap of two years or more in
submitting a gift aid claim). Charities that fall foul of the gift aid regime and receive
a penalty from HMRC will not be eligible for top-up payments in the year when the
penalty is received and will also be excluded from the GASDS for the year.
Any cash donation of under £20 where no gift aid declaration is in place is eligible
for the GASDS. Aside from a small acknowledgement (such as a sticker) no benefits
may be given by a charity to a donor for that donation to be eligible for the GASDS.
This means no top-up payment can be claimed in respect of any membership
subscriptions a charity receives.
Charity trustees will be expected to take reasonable steps to ensure that only
donations of under £20 are included in the GASDS. Guidance from HMRC on
GASDS has just been published and further more detailed guidance is expected
HMRC will administer the GASDS using the Gift Aid claim system, and the new
online system that is expected to be introduced for gift aid claims will also be
designed to facilitate claims for top-up payments under GASDS.
The maximum top-up payment can be claimed on small donations of £5,000,
except where charities operate a number of community buildings where an
additional ‘community building amount’ may be available. There is also a matching
requirement obliging charities to claim gift aid on an amount that is at least 10% of
the value of the donations on which a top-up payment is being claimed. Charities can
therefore only use the GASDS in a year in which a gift aid claim is made. Charities
that are connected to each other will have to share the top-up payment available
between themselves rather than each having their own entitlement to claim a top-up
payment. The value of the top-up payment will be calculated so that the payment
will be equal to the amount that could have been claimed in gift aid by the charity had the donors provided declarations (subject of course to the maximum value of the payment). With the current basic rate of income tax at 20%, charities will be able to claim a top-up payment equivalent to a gift aid reclaim on up to £5,000 of small cash donations.
Top-up payments under the scheme are not gift aid payments and payments are not,
strictly speaking, tax re-claims instead being funded through public expenditure.
While this should make no substantive difference to charities, it will need to be made
clear to any donors paying higher rate tax that no deduction against their tax bill can
be claimed in respect of small cash donations.