The Chartered Institute of Taxation (CIOT) has launched a new Gift Aid resources website. The aim is to provide a full summary of Gift Aid and related issues for use by charities and tax advisors to philanthropists.

HM Revenue & Customs (HMRC) pays around £1bn a year to charities and other qualifying bodies through Gift Aid.

The website covers the basics of Gift Aid, which gifts qualify and key areas of difficulty for tax advisors and clients, for example, when a donor makes a series of gifts. It covers the rules and gives examples of how to calculate the so-called benefit test and aggregate value test.

A benefit is treated as being associated with a gift if the donor or a person connected to him receives the benefit as a consequence of making the donation. This test is decided on the basis of the result of a benefit value test.

• For single gifts: on a benefit value per gift basis.
• For a series of gifts: on the basis of an aggregate value

The value of a benefit deriving from a gift is calculated as follows:

Amount of donation

Benefit value limit

£0 -£100

25% of the gift

£101 - £1,000

£25

Above £1,000

5% (prior to 5 April 2007 - 2.5%) of the gift

Above £10,000

£2,500 (from 6 April 2011)
£500 (from 6 April 2007)
£250 (before 5 April 2007)
subject to the rule that the benefit must not exceed 5% of the gift

The Aggregate Value Test ensures that the maximum benefit that can be received by the donor taking into account all Gift Aid donations made during the tax year is £2,500.

A case study to illustrate this:

Mr Blue makes two donations of £50,000 to his favourite charity in 2011/12 and in gratitude it gives him holiday vouchers which entitle him to discounts worth £2,500 a piece. Taking each gift separately, the value of each holiday voucher does not exceed the 5% benefit test, however, the value of all the benefits received from this series of gifts amounts to £5,000 and so fails the Aggregate Value test.

The website also has a section on special cases such as auctions and goods sold. Where a donor donates goods to a charity in order to allow the charity to sell the goods in order to raise funds, the goods do not amount to payments and so Gift Aid relief cannot apply. The guidance on the website says: “HMRC regards the practice of claiming Gift Aid on sold goods as pushing the boundaries of Gift Aid relief.”

Links

The website can be found here