Policy background
Gift Aid Small Donations Scheme
3 The Gift Aid Small Donations Scheme was announced in the 2011 Budget and introduced by the Small Charitable Donations Act 2012 from 6 April 2013. The purpose of the scheme is to enable charities and CASCs to claim a Gift Aid style top-up payment on small donations up to £20 in circumstances where it is not practical or feasible to obtain a Gift Aid declaration.
4 Unlike Gift Aid, which is a tax relief, the Gift Aid Small Donations Scheme does not require individual donors to complete Gift Aid declarations. However, the scheme is designed to broadly mirror Gift Aid and charities and CASCs submit claims in a similar way.
5 Currently charities and CASCs must meet certain eligibility criteria in order to claim a top-up payment in respect of small donations they receive in a tax year. A charity must have been in existence, and a CASC must have been registered as a CASC, for at least the two previous complete tax years. Charities and CASCs must also have made successful 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 scheme is currently therefore two years. This Bill removes both of these criteria so that newly formed charities can access the scheme.
6 Charities and CASCs must also make Gift Aid exemption claims on donations received in the same tax year in order to make a claim under the Gift Aid Small Donations Scheme. The total Gift Aid donations must be at least 10% of the amount of the small donations on which top-up payments are claimed for that tax year. This requirement is unchanged by this Bill.
7 There are special rules in certain circumstances that increase the maximum amount of small donations on which top-up payments can be claimed. If a charity runs charitable activities in a community building, the maximum limit is increased from £8,000 of small donations by up to a further £8,000 for small donations collected in each community building. The "community building" provisions do not apply to CASCs. This Bill simplifies and clarifies the operation of these rules for charities.
8 The GASDS rules were designed to ensure, as far as possible, that charities operating in a similar way but structured differently have the same entitlement to top-up payments. For example, a charity may have several branches but registered as one charity or, alternatively, another charity may have the same structure but each branch may be registered as a separate charity.
9 The connected charity rules ensure that where two or more charities are connected they share one £8,000 top-up limit between them (so they are in the same position as a single charity with several branches which are not separately registered). However, where a charity - or 'group' of connected charities - carry out charitable activities in one or more community buildings they are entitled to claim in respect of further donations up to a maximum of £8,000 made in each community building as described in paragraph 7.
10 Broadly, charities or CASCs are connected with each other at any time during a tax year where the same person or persons controls them and the charities or CASCs have the same or very similar purposes.
11 In certain circumstances the current rules result in some charities being entitled to more allowances than others despite carrying out similar activities in a similar way. Changes made by this Bill seek to ensure that the scheme operates more fairly. From 6 April 2017 a charity - or group of charities - will be able to claim in respect of either (i) the total of the community building amounts: up to £8,000 small donations made in the local authority area in which each community building is located (see paragraph 14 below) or (ii) a total of up to £8,000 small donations made anywhere in the UK. The charity will be entitled to claim whichever is more beneficial.
12 Where a 'group' of connected charities carries out activities in community buildings it will generally be more beneficial to claim community building amounts so this is the default position. However, if this is not the case, connected charities may opt to claim in respect of £8,000 small donations made anywhere in the UK instead by writing to HMRC.
13 The effect of the changes is that a charity - or group of connected charities - will only be able to claim in respect of small donations totalling more than £8,000 where they have more than one community building. A charity with one community building will be able to claim a top-up payment on a maximum of £8,000 donations.
14 This Bill amends the definition of a 'community building amount' so that donations no longer have to be made in the community building itself while charitable activities are being carried out. From 6 April 2017 small donations made in the local authority area in which the community building is located may qualify as part of the community building amount.
15 Small donations made by contactless payment may, from 6 April 2017, qualify as small donations.
Tax Free Childcare
16 Tax free childcare was legislated through the Childcare Payments Act 2014, which introduces a new scheme which provides financial support to working families with the costs of childcare. The purpose of the scheme is to enable those with responsibility for children to take up paid work, or to work for longer, where they are currently deterred from doing so because of the need to meet childcare costs.
17 Once the scheme is implemented, for every £8 which a person pays towards childcare costs, the Government will make a top-up payment of £2. The value of Government support will be capped at a maximum of £2,000 per child each year (or £4,000 for disabled children), although there will be no restriction on the number of children for whom support would be available. The scheme will be managed by HMRC and the Government intends to introduce it in early 2017.
18 The introduction of the scheme was announced by the Chancellor of the Exchequer at Budget 2013 when it was described as ‘tax-free childcare’. The use of that term reflected the fact that the 20% Government top-up payments in effect represent the basic rate tax element which would apply to the income used by the individual to fund their childcare costs. Government top-up at a rate which parallels standard rate Income tax is a feature it shares with the Gift Aid Small Donations Scheme.