Budget 2024 – Charity Gift Aid rules changing

Budget 2024 – Charity Gift Aid rules changing

HMRC is planning to clamp down on charitable tax reliefs claimed through Gift Aid, but not until 2026 to ‘give charities time to adjust to the new rules.’

Each year more than £1.6bn is claimed in Gift Aid by charities and HMRC believe it is open to abuse which has led HMRC being able to set out tighter rules following a consultation on charitable tax relief.

The changes in legislation are set to tackle three key areas giving HMRC additional compliance powers.

• The first key change will be powers to act on ‘tainted donations’, which are classified as when a company makes a large donation to a charity with the intention of gaining a tax advantage.
• Investments made by charities which qualify for tax reliefs will have to be for the benefit of the charity, and not to avoid tax.
• Finally, any tax relieved income made must be spent on charitable activities.

HMRC said: ‘Following the responses from the consultation this government has decided to make incremental and modest changes to preserve these important tax reliefs for the compliant majority and help to protect the reputation of the sector.’

Another rule will give HMRC the power to sanction charities which fail to file their tax returns. HMRC said: ‘Some charities persistently fail to comply when HMRC send a notice to file a return, and yet still claim tax reliefs such as Gift Aid and expect it to be paid.’

A failure to file a tax return could lead to the withholding of Gift Aid payments and business relief claims if charities fail to comply.

When the changes are introduced in 2026-27 it is expected to stop £20m in tax abuse, rising to £35m a year over the next three years, £125m in total up until 2029-30!!!