Gift Aid declarations – a new role for digital giving platforms

This change, introduced by the Donations to Charity (Gift Aid Declarations) Regulations 2016 (the Regulations), is aimed at making it easier for donors to make Gift Aid donations to multiple charities online. Instead of having to make a Gift Aid declaration for each donation, in future they should only have to make one Gift Aid declaration each year for all donations they make via a single intermediary, and authorise the intermediary to make declarations on their behalf for other donations made in the rest of the tax year.

How it will work

When a donor first makes a Gift Aid declaration to an intermediary, the intermediary may ask for authorisation to complete declarations on the donor's behalf for the rest of the tax year. The Regulations say nothing about what authorisation – or the request for it – should look like. The authorisation process will only be complete once the intermediary has explained to the donor that they will be responsible for making up any shortfall if they don't pay enough tax to cover their gifts, in accordance with section 424 of the Income Tax Act 2007 (ITA).

Once authorised, the intermediary will create declarations for all gifts the donor makes for the rest of the tax year via that intermediary. Declarations made by intermediaries must:

• contain the name and home address of the donor;
• name the charity (or be made in circumstances where the charity is identified);
• identify the gift to which the declaration relates; and
• confirm that the identified gift is to be a Gift Aid donation.

The donor will be able to revoke authorisation at any time by giving notice to the intermediary, either orally or in writing. Authorisation will cease on the date the intermediary receives the notification or, if the notice specifies a later date, on that later date.

Most authorisations will last until the end of the tax year, but the Regulations provide that where authorisations are made on or after 1 March, they will last until the end of the following tax year (so an authorisation given on 3 March 2018 will last until 5 April 2019). Once the tax year has ended, the intermediary will need the donor to agree positively to extend the authorisation (and once again explain to them the effect of section 424 of the ITA). If the donor does not positively confirm that they want to extend the authorisation, the intermediary will need to revert to the system of asking for a fresh declaration each time the donor gives to a new charity.

Intermediaries will have to keep certain records relating to authorisations:

• the name and address of each donor and the date on which authorisation was received. This must be kept for six years from the end of the tax year;
• the date on which they explained section 424 of the ITA to each donor. This must also be kept for six years from the end of the tax year;
• any cancellations of authorisations. This must record the name and address of the donor and the date on which cancellation was received. Again, this must be kept for six years;
• to provide an annual statement to donors who use the authorisation process;
• to keep a record of those annual statements (for six years).

Failure to comply with any of these obligations may result in a penalty. An intermediary's liability for penalties will be capped at £3,000 per tax year and it will be possible to appeal against penalties.

The annual statement referred to above will have to be sent to each donor  who has made more than one Gift Aid donation through the intermediary, the total of which is over £20. The statement will need to be sent to the donor by 31 May immediately following the end of the tax year in which the intermediary made a Gift Aid declaration on the donor's behalf, and set out:

1. the total amount of Gift Aid donations the individual has made via the intermediary during the tax year;
2. the maximum amount of Gift Aid that could have been claimed on those donations;
3. that if the donor did not pay enough tax in the year to cover their gifts, it is the donor's responsibility to pay the shortfall;
4. an explanation that donations made directly to charities and donations through other intermediaries are not included in the statement.

This new system is, of course, optional for intermediaries, but HMRC has published brief guidance for those that wish to use it.

What will change for charities?

Charities may not notice any difference, other than – with any luck – an uptick in the number of Gift Aid declarations they receive for donations made digitally. That said, further changes may be in the pipeline: the legislation that made it possible for donors to authorise intermediaries to make Gift Aid declarations on their behalf also laid the foundations for allowing charities to authorise intermediaries to receive Gift Aid declarations on their behalf. There are no signs that the Government is in a rush to build on those foundations, but we may see something in due course.

You can find the Regulations and the accompanying Explanatory Memorandum here.

If you require further information on anything covered in this briefing please contact Rachel Holmes([email protected]) or your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, March 2017