Changes to Charity Tax Relief Thresholds

Charity Tax Relief

Charity fundraisers need be aware of two changes to charity tax relief thresholds that apply from 6 April 2019.

Gift Aid

Charities often encourage donations by giving a small reward to their donors. Where this is more than token value, this needs to be measured and assessed against value thresholds to make sure that gift aid can still be claimed. The benefit value thresholds will be simplified slightly in April, reducing the thresholds from three to two. The new limits will be:

  • For donations up to £100: 25% of the value of the gift (as before)
  • Donations over £100: £25 plus 5% of the excess over £100
  • Maximum annual benefit £2,500 (as before)

As before, beware of some pretty grey areas in the gift aid rules on assessing benefits ‘associated with’ donations. Take care or get professional advice.

The Gift Aid Small Donations Scheme (SDS) allows charities to claim a gift aid type benefit of 25% of donations without requiring a personal declaration. Until now, the maximum donation under SDS has been £20. This limit will increase in April to £30, making a small difference to charities that receive impromptu small donations from individuals, e.g. from bucket collections.

Trading

Charities with total turnover above £200,000 can undertake non-primary purpose trading of income up to £50,000 and benefit from a tax exemption (trading towards their primary charitable purpose can be at any level). For charities whose total income is below £200,000, there is a scale of lower trading exemption limits.

The small trading thresholds, which haven’t moved for 20 years, will be revised upwards in April 2019, effectively allowing charities to undertake more trading activity before a trading subsidiary is needed. The new limits for non-primary purpose trading income will be:

  • For income below £32k: limit at £8k
  • For income £32k to £320k: limit at 25% of income
  • For income over £320k: limit at £80,000

Remember, of course, that subsidiaries aren’t set up just to prevent tax in a charity. The decision on whether or not to run operations in a subsidiary often requires assessment of other factors, including risk management, VAT, business rates exemptions and cost of administration.

If you have any questions or if you would like to discuss charity tax relief with us in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Not for Profit team

This article originally appeared on the blog of our member firm, Larking Gowen.