Commentary on Sections Section 18: General interpretation
107.Section 18 provides interpretation of certain terms used in the Act. Subsection (1) defines “charity” for the purposes of the Act as including a CASC although, because CASCs do not carry out charitable activities, they are excluded from the provisions relating to a charity running charitable activities in sections 6 to 8.
108.Subsection (3) of section 18 defines what is meant by a “successful Gift Aid exemption claim” and a “successful top-up claim” in the context of the new scheme. Where a charity or CASC makes a Gift Aid exemption claim, the grossed-up amount of the donation – that is the money given by the donor plus the basic rate income tax on that donation which is repaid by HMRC – is exempt from tax to the extent that the gift or grossed up donation is used for charitable purposes (for charities) or qualifying purposes (for CASCs). If any part of the grossed-up donation is used for non-charitable or non-qualifying purposes the charity or CASC becomes chargeable to tax on that part of the grossed-up donation, subject to certain rules.
109.Paragraph (a) of section 18(3) defines what is meant by a “successful Gift Aid exemption claim” for the purposes of the eligibility conditions in section 1(1) and section 2. A Gift Aid exemption claim is “successful” where an amount of donation income falls to be exempt from income tax or corporation tax as a result of the claim. This paragraph recognises that in some instances not all of a charity’s or CASC’s Gift Aid exemption claim may fall to be exempt - a claim for exemption is sometimes subject to change, perhaps because part of the exemption is withdrawn as a result of a charity or CASC applying the donation income for non-charitable or non-qualifying purposes.
110.Paragraph (b) of section 18(3) further refines the concept of a successful Gift Aid exemption claim for the purpose of the matching rule in section 1(5). Only the amount of donations in a Gift Aid exemption claim that are used for wholly charitable, or wholly qualifying, purposes are to be taken into account for matching purposes. This prevents a charity or CASC from using, for example, £100 of Gift Aid donation income to match against £1000 of GASDS income, where perhaps £50 of the Gift Aid donation income is applied for non-charitable or non-qualifying purposes.
111.Paragraph (c) defines a “successful top-up” claim for the purposes of determining the specified amount for a connected charity or CASC.