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Small donations to charities to qualify for new top-up payments

09 May 2012

Changes announced today in the Queen’s speech will enable charities to claim top-up payments on up to £5,000 of small donations without needing Gift Aid declarations.

The plans contained in the Gift Aid Small Donations Scheme is intended to boost the income of charities and in addition to reduce the overall administration needed from not having to collect Gift Aid declarations on all small donations.

The proposals, which will come into place in April 2013, will mean that charities will be able to claim the Gift Aid-style top-up payments from HM Revenue and Customs without needing to get a Gift Aid declaration from donors. The top-up payment will be 25p for every pound collected in the United Kingdom, on up to £5,000 of donations, where the individual donations are £20 or less.

Chloe Smith, Economic Secretary to the Treasury, said:

“This scheme will be particularly helpful for small charities that rely on bucket collections, which can find it impractical to get the necessary paperwork that Gift Aid requires. Charities and Community Amateur Sports Clubs will now be able to claim a Gift Aid-style payment on small donations without the need to collect donors’ details.”

Unlike Gift Aid, which is a regarded as a tax relief, the new scheme will be viewed by the Government as a spending measure since there is no direct link between the donor’s tax record and the payment to the charity. In order to reduce the risks of fraud, to be eligible, charities must have a three-year record of successfully claiming Gift Aid and must continue to make Gift Aid claims to qualify.

HMRC is consulting on the final policy until 25 May.

Written by Richard Nelson LLP

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