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The Treasury recently announced plans to make the Gift Aid system easier to follow. This comes after a long period of consultation as Margaret Hodge, the chair of the Public Accounts Committee, branded the system as not being “fit for purpose”.


The changes may be welcomed by many, especially as research has revealed that the number of investigations conducted into Gift Aid by HMRC has more than doubled in the last year.

According to data released by Wilkins Kennedy, an accounting firm, in 2011-12 HMRC conducted 510 checks into claims for Gift Aid, but in 2012-13, the number of checks and audits more than doubled to 1,057. It is possible that an increased number of checks are being carried out on charity claims for the tax relief, following an investigation last year into the Cup Trust by the Charity Commission.

The Cup Trust was opened in 2009 and has a sole trustee – a company called Mountstar. The firm’s base is in the BritishGift Aid HMRC Virgin Islands, and the company directors were recognised by the tax authorities in the UK. Income was generated to a sum of £176m, but only £152, 292 was distributed to charities. Gift Aid of £46m was claimed by the charity, but refused by HMRC. In April last year, this lead to the Charity Commission opening an inquiry. According to Wilkins Kennedy, the case has led to the increased focus on the charitable sector, which also included Margaret Hodge labelling the commission as being unfit for purpose.

One of Wilkins Kennedy’s partners, John Howard said:

“HMRC is on the look-out for charities it believes have been set up for tax, rather than charitable, purposes and root out cases where the donors’ main aim is avoidance.”

Howard also stated that fraud and deliberate abuse of the Gift Aid system is rare, but HMRC will investigate when anything considered suspicious is discovered. Concerns were raised by experts over the possibility of charities that make honest mistakes facing increased scrutiny, which in many cases is due to the Gift Aid system being complex. Small charities in particular are believed to be at risk, as they may not have the capacity to avoid errors. According to the Treasury, the new plans to simplify will make it easier for a charity to maximise donations.

For any organisation concerned about the Gift Aid system, it is advisable to seek professional advice to avoid the risk of an investigation by HMRC.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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