Summary and Background
3.The Small Charitable Donations Act 2012 introduces the Gift Aid Small Donations Scheme (GASDS) which was announced at Budget 2011. The purpose of the scheme is to enable charities and Community Amateur Sports Clubs (CASCs) to claim a Gift Aid style payment on small cash donations up to £20 in circumstances where it is often difficult to obtain a Gift Aid declaration. In general, eligible charities and CASCs will be able to claim top-up payments on up to £5,000 small donations each year.
4.The new scheme does not require individual donors to complete a Gift Aid Declaration or the charity or CASC to provide the donor’s details with their repayment claim as required under Gift Aid.
5.The top-up payment is designed to be paid at the same rate, and administered in the same way, as Gift Aid. Therefore where the basic rate of income tax is 20%, small donation income of £5,000 will entitle the charity or CASC to a top-up payment of £1,250.
6.In order to be eligible to make claims under the GASDS in respect of small donations received in a particular tax year, a charity or CASC must meet certain eligibility criteria. A charity must have been in existence, and a CASC must have been registered as a CASC, for at least two complete tax years. They must have made Gift Aid exemption claims in at least two of the previous four tax years. The minimum period for a new charity or CASC to qualify for the new scheme is therefore two tax years, providing the charity or CASC makes a Gift Aid exemption claim in each of the two tax years.
7.Charities and CASCs that incur a penalty under Gift Aid or the GASDS will be excluded from making claims under the GASDS for the tax year in which the claim giving rise to the penalty was made, and the following tax year. But, Gift Aid exemption claims made in those tax years will still count in determining eligibility in subsequent years. However, a charity or CASC remains an eligible charity or CASC and so may continue to make claims under GASDS if the penalty is suspended or cancelled, unless the suspended penalty subsequently becomes payable.
8.A charity or CASC must make Gift Aid exemption claims on donations received in the same tax year in order to make a claim to a top-up payment under the GASDS. The total Gift Aid donations must be at least 10% of the amount of the small donations on which top-up payments are claimed. That means that if a charity or CASC claims on the maximum £5,000 of small donations, they will need to have successfully claimed Gift Aid on at least £500 of donations in the same tax year.
9.There will be special rules in certain circumstances to increase the maximum amount of small donations on which top-up payments can be claimed by some charities. If a charity runs charitable activities in a community building, the maximum limit is increased from £5,000 of small donations by up to a further £5,000 for small donations collected in each community building. The “community building” provisions do not apply to CASCs.
10.Charities and CASCs that are connected with one another will share between them the maximum £5,000 limit on which small donations may be claimed. However the additional allowance due to a connected charity that runs charitable activities in a community building will not be affected.
11.Where a new charity or CASC takes on the activities of another charity or CASC, or two or more charities or CASCs merge to form a new charity or CASC, there are special rules that enable the new charity or CASC to take account of the Gift Aid history of one of the original charities or CASCs to enable the new charity or CASC to qualify for GASDS.
12.Most of the legislative machinery for administering the scheme will be provided for in regulations. The regulations are intended to mirror the administrative provisions in the Taxes Acts that are used to administer Gift Aid exemption claims.