A number of changes for the charity sector have been put forward by the UK government:
- The simplification of the Gift Aid restriction on associated benefits;
- An increase in the upper limit of non-primary purpose trading;
- An increase in the individual donation limit under the Gift Aid Small Donation Scheme; and
- A reduction in administration for charity shops using the Retail Gift Aid Scheme.
The key tax changes that could affect you are:
1. Gift Aid restriction on associated benefits
Finance (No3) Bill 2018 (‘FB18’) includes simplified restrictions to the rules on associated benefits that donors can receive without losing the Gift Aid status on their donation. The new restrictions which apply to both individual and company donors from 6 April 2019 are:
For donations up to £100, the value of the benefit can equate to a total of 25% of the donation.
For donations over £100, the value of the benefit can equate to a total of 5% of the donation that exceeds £100 plus £25. This is up to a maximum benefit value of £2,500 per tax year.
2. An increase in the upper limit of non-primary purpose trading
Non-primary purpose trading income received by a charity is taxable unless it falls within the below thresholds. FB18 increased these thresholds and they will come into effect from 6 April 2019 for income tax and from 1 April 2019 for corporation tax:
Annual charity income
Maximum non-primary purpose trading
3. An increase in the individual donation limit under the Gift Aid Small Donation Scheme
From 2013, cash donations of up to £20 have been eligible for charities to include in their Gift Aid claims without having to obtain and store Gift Aid declarations. From 2017 this was extended to apply to contactless payments and, as announced in the 2018 Budget, this limit will be increased to £30. The increase to £30 will have effect on or after the relevant secondary legislation has been approved by a resolution of the House of Commons. Parliamentary timetable permitting, the increase would become effective from 6 April 2019.
4. A reduction in administration for charity shops using the Retail Gift Aid Scheme
The 2018 Budget includes a welcome reduction in administration for charity shops. Charity shops which use the Retail Gift Aid Scheme will only need to send letters to donors every three years when their goods raise less than £20 a year, rather than every tax year. This change should apply from April 2019.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.