Over the past year there has been an ongoing discussion between HMRC and various charity stakeholders about the collection of additional information on Gift Aid Declaration (GAD) forms.
Until recently, HMRC only requested an initial rather than a full first name on the form. This means that in some instances it has not been possible for the authorities to distinguish between two people. For example, if father and son John and James Smith live at the same address, their GAD forms present the same names and addresses. However, one may be a taxpayer while the other is not; the non-taxpayer would not be eligible for Gift Aid and this would be incorrectly claimed by the charity.
A report commissioned by HMRC to look into issues around Gift Aid was published in September 2016, and noted the following conclusions:
- when the report was written, around £1.16bn in Gift Aid was being claimed by charities from the Government each year
- it’s estimated that 8% of donations had Gift Aid incorrectly added by ineligible donors, creating a tax gap of up to £180m a year
- it’s estimated that 25% of the value of donations did not have Gift Aid added even though the donor was eligible, meaning that charities missed out on £560m of potential income.
To close the tax gap created by the incorrectly claimed Gift Aid, HMRC wants charities to request more information on their GAD forms. This would enable HMRC to better match the details on GAD forms with people’s tax records, and to confirm if the donor has paid enough tax to cover the amount of Gift Aid claimed by the charity.
The additional information considered by HMRC for mandatory inclusion consisted of full legal names, national insurance numbers and dates of birth.
Timeline of discussions
In June 2018, the findings of the research were presented to the Charity Tax Forum, and HMRC indicated that guidance would be clarified in respect of forenames on declaration forms rather than merely initials. At the following Charity Tax Forum in October 2018, HMRC confirmed that from April 2019 they would request the donor’s first full name, surname and postcode, but that this change would not apply retrospectively. The Forum members raised their concerns, particularly in relation to small charities without enough digital capability, as well as the additional costs associated with the change, fraud implications and GDPR requirements.
A further working group meeting took place in December 2018 to clarify the position and decide a way forward. Attending this meeting were members of the Charity Tax Group, as well as representatives from a number of large UK charities, such as the British Red Cross, the National Trust and Chester Zoo.
Concerns over new procedures
The charity sector’s main concerns were from two perspectives – that of the donor, and of the charity itself.
From a donor’s perspective, there are fears that legitimate donors might find the additional information requests intrusive and be less willing to complete the form, meaning that Gift Aid would reduce as a result. They may be put off by the additional time needed to complete the form. They might also be concerned about the use of their personal data if they provided their date of birth, and they might not know their national insurance number off by heart.
From a charity’s perspective, additional cost may be incurred to collect the information, such as system changes and staff time. If GAD forms are completed online, the issue over legibility of someone’s handwriting does not exist; however, manual forms sometimes cannot be easily read, so requiring only an initial is less problematic. At the meeting, Chester Zoo estimated that at peak times, requesting full names from Gift Aid donors could amount to 14 additional hours of queuing, and would need two more staff and two more payment points to reduce the resulting queue.
Charity groups also argued that requesting a full first name would not fully resolve the problem and reduce the amount of Gift Aid claimed incorrectly. The change may actually mean that charities incur additional cost. Other approaches were suggested, such as better reporting of the contact information and reminding donors to renew their older declaration forms.
Overall, attendees of the working group were opposed to the mandatory changes to GAD forms, but did agree that charities should encourage donors to give as much information as possible.
At the February 2019 Charity Tax Forum meeting, HMRC reiterated that GADs should include as much information as possible about the donor. It has been agreed that:
- charities should try to request full names wherever feasible
- authorities are seeking gradual improvement in the completion of first names on GAD forms, rather than a mandatory change from April 2019
- there is therefore no retrospective change occurring
- if charities hold a donor’s full name, they are encouraged to give this data to HMRC
- charities are encouraged to document any actions they take to improve the collection of first name information.
The Government website – Chapter 3 on Gift Aid – now states that the declaration should show:
- the donor’s full name – as a minimum HMRC will accept the donor’s initial and surname
- the donor’s full home postal address – as a minimum HMRC will accept the number (or name as appropriate) of their home and their full postcode.
It adds: “If HMRC finds the details on a declaration are not enough to trace the donor, they may ask the charity to get more information to check the claim. If the charity fails to get this information, it’s likely that the declaration will be considered invalid.”
It’s fully understandable that HMRC wants more information about donors, so that they can clearly identify individuals and avoid confusion over names. However, it’s hoped that any future changes to GADs decided by HMRC will not have a costly impact on charities going forwards.
Any charities claiming Gift Aid should prepare for these changes, with an expectation that more detail may be made mandatory in future.
This article was written by Charity Specialist Alice Marshall-Chalk. If you have any questions regarding this article you can contact Alice using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.