The Justgiving Blog

The news that Gift Aid was going to stay at 28% was greeted with cheers from all corners. But whilst the future is rosy for the next three years, upon reading the small print, you’ll see that the whole Gift Aid process has actually become more difficult for the next four months or so.

Let me explain (and there is, alas, no easy or short way to explain this)…

The Budget good news

On 6th April 2008 the basic rate of income tax is being reduced from 22% to 20%.  This changes the calculation behind the rate of Gift Aid reclaim from 22/78 (28.2%) to 20/80 (25%).

While all claims “allowed” (i.e. all donations made on or after the 6th April 2008) in the new tax year will be repaid initially at the rate of 25%, the Treasury has ordered that transitional relief of 3.2% also be repaid to charities on all donations made before 6th April 2011.

The small print

No transitional relief will be repaid until Royal Assent is granted to the Finance Bill 2008.

Which is nice.

Apparently, Royal Assent is a procedural formality of the legislative process and there is virtually no possibility of refusal.

But this is not expected to take place until some time in July.

Which is really great to know when you’ve been given more or less two weeks notice to change one of the most important processes for your business or charity…

Once Royal Assent is granted, HMRC plan to go through all the claims which include donations from the qualifying period (i.e. since 6th April 2008) and pay the extra 3.2% separately, as if it were a correcting payment to the original claim.

What this means is that we will have to reclaim Gift Aid at a rate of 25% until Assent is granted, at which point HMRC will pay the additional transitional relief of 3.2% automatically.

Claims submitted or processed after Royal Assent has been granted will be effectively processed as per tax year 2007-2008 for 28.2% of Gift Aid, although technically 3.2% of this will still be transitional relief.

After July we will need to continue to report Gift Aid and Transitional relief separately, although they are likely to be received from HMRC and paid over to charities together.

Submission and separation of April Gift Aid claims

We will submit Gift Aid claims for this transitional period as below:

1st April 2008 – 5th April 2008 donations – CLAIM A
6th April 2008 onwards donations – CLAIM B

Justgiving will generate a Gift Aid claim for 1st to the 5th April (Claim A) at the old 28.2% rate. This will be sent off to HMRC shortly thereafter so charities should get their Gift Aid payment that much sooner.

Subsequent claims (Claim B’s) will be at the new rate of 25% (the 3.2% relief will not be noted on the claim form), raised at the end of the month.

But – this is a last minute plan for HMRC and what they have told us could potentially change.

Again, this is really helpful to our developers and finance team who have been frantically changing our business, finance and varied back office systems…

Charity Account Reporting

For payments of  Gift Aid at the new transitional rate we will add three new columns to our reports: a 25% Gift Aid column plus a 3.2% Transitional rate column and a total Gift Aid column.

However, as the first payment of transitional rate Gift Aid is unlikely to be made before the end of May, this change will not be visible until then.

One last thing to note is that our 5% fee will still be calculated on gross donations (the donation plus Gift Aid at the 28% rate) throughout this period. And it will be taken out of the payments we make at 25%, before Assent is given. But that does mean the transitional relief payments of 3.2%  we’ll make will have no fees deducted.

That’s all folks

Hopefully you’ve understood this, it’s been a dubious pleasure to try and explain it. But email me if you have any questions (although I can’t guarantee I’ll be able to give a better explanation!).

And, suffice to say, where I quoted our CFO in ebullient mood in our first post about the new Gift Aid rates, his opinions this time aren’t suitable for posting online…