HMRC explains Gift Aid changes in guidance document

CHARITY SHOPS must make the procedure of selling items clear to potential donors, according to a newly-published HM Revenue & Customs guidance document.

Changes to the Gift Aid regime are laid out in the guidance, along with a template letter, outlining the various methods of claiming Gift Aid.

Charity shops will often ask people who donate items to make a Gift Aid declaration. Charities cannot claim Gift Aid on donations of physical items, such as clothes or books, only on donations of money.

However, charities can claim Gift Aid on donations of the income from the sale of supporters’ goods. In order for that to happen, the donor must retain legal and beneficial ownership of the goods until they are sold.

When the items have been sold, the donor can then donate the proceeds. The usual Gift Aid conditions apply, in particular that the donor must have sufficient tax liability to cover the tax reclaimed under Gift Aid.

In a blog post on its website, the ICAEW’s tax faculty wrote: “It does sound as though HMRC may be planning to take a closer look at charity shops that operate Gift Aid schemes for donated goods and at donors who make Gift Aid declarations but do not pay sufficient tax to cover the donations.”

The guidance notes can be seen here.

Related reading