HMRC issue new guidance on claiming Gift Aid on waived refunds and loan repayments

Gift Aid on “payments of money”

In the past, it was not possible to claim Gift Aid on waived refunds and loan repayments unless the charity first repaid the monies to the donor, then the donor re-donated it. This is because usually a donation only qualifies for Gift Aid if it is a gift consisting of a “payment of money” by an individual who has/will pay sufficient UK tax, to a charity and it satisfies all of the following conditions:

  • the gift is not subject to a condition as to repayment
  • the gift is not a Payroll Giving donation
  • the gift is not deductible from income for tax purposes
  • the gift is not part of an arrangement for the charity to acquire property from the individual or a connected person
  • any benefits associated with the gift are within the statutory limits

In addition, a charity may only make a Gift Aid claim if the following conditions are met:

  • the charity must have a Gift Aid declaration made by the donor which covers the donation
  • the charity must have evidence that they have explained to the donor the personal tax implications of making a Gift Aid donation – this can be done by including an explanation on the Gift Aid declaration or separately
  • there must be an audit trail linking the donation to the donor and their Gift Aid declaration

New guidance

As a result of the coronavirus pandemic charity funding has been under extreme pressure, so in April 2020 HMRC agreed to introduce a temporary concession to allow waivers of refunds and loans to charities to be treated as donations upon which Gift Aid could be claimed. This concession was aimed at charities that had sold tickets for events that had to be cancelled due to coronavirus.

HMRC have now confirmed that the April 2020 change is to be made permanent and have issued guidance on the matter.

In summary, the guidance states that the waiver will be eligible for Gift Aid provided there is a record of a formal waiver held by the charity and all other Gift Aid rules are met (i.e. the conditions set out above). Information on what is accepted as a formal waiver is set out in the guidance.

We would recommend that the guidance is read in full before making a Gift Aid claim on waived refunds and loans.

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