HMRC have been under pressure from the Public Accounts Committee to demonstrate that they are properly controlling the gift aid refund scheme for charities.

One of the main criticisms has been that a large number of gift aid declarations are made by persons who are not eligible to make them. This might be because they are not UK resident taxpayers or because they do not pay enough tax to qualify. You can only complete a gift aid declaration if you pay as much tax as the charity is claiming. This means that persons who do not pay UK tax because their income fall below the threshold are not eligible to complete the declaration. This is obviously becoming more of an issue as the income tax threshold increases.

To discourage people incorrectly completing such declarations HMRC have been in discussions over a new wording for the gift aid declaration that makes it clear to people completing the form that if they are not eligible to complete a gift aid declaration then they may be liable for the tax that are allowing the charity to claim. This obviously has the potential to discourage  eligible as well as ineligible gift aid donors – people don’t understand the tax system and could run scared if they believe they may end up with an additional tax liability.

The new wording is milder than some earlier drafts. It is that ‘I am a UK taxpayer and understand that if I pay less Income tax and/or Capital Gains tax in the current tax year than the amount of gift aid claimed on all my donations it is my responsibility to pay any difference’

The new declaration will be compulsory after 5 April 2016. See HMRC Guidance

If you use the gift aid scheme it might be as well to ensure that your staff understand how it is meant to work so they can reassure donors when necessary.