The 0% starting rate on up to £5,000 of savings income, along with the introduction of the savings allowance and changes to tax on dividends from 6 April 2016, could result in more donors having an unexpected tax bill.
If the income tax attributable to an individual’s donations made under Gift Aid in a tax year exceeds the income tax and capital gains tax with which the individual is chargeable for that year, the individual is liable for the difference.
Although this does not affect charities directly they should ensure donors are made aware of this possible tax liability to enable them to consider withdrawing gift aid declarations if they think it could result in a tax liability.
In October 2015, HMRC issued new model gift aid declarations. Whilst HMRC permitted charities to use up stocks of existing forms up until 5 April 2016, any gift aid declarations made from 6 April 2016 must use the new wording. HMRC recommends that all charities and Community Amateur Sports Clubs (CASCs) use the wording of the HMRC approved declaration, however they remain free to adapt the model declaration to include their own branding or additional wording should they wish.
The new model gift aid declarations apply to one-off donations, multiple donations and sponsored events. The new model declarations are clearly drawing the donor’s attention to the tax legislation, with the wording for a one-off donation stating:-
“I am a UK taxpayer and understand that if I pay less income tax and/or capital gains tax in the current tax year than the amount of Gift Aid claimed on all my donations, it is my responsibility to pay the difference.”
Templates for multiple donations and CASCs can be viewed via the following link: www.gov.uk/guidance/gift-aid-declarations-claiming-tax-back-on-donations
If you would like to further advice on this or any other issues affecting your charity please do not hesitate to get in touch by Email or phone 01233 630000.