Retail Gift Aid Stephen Maudsley Event Name Here 12/02/2007 Retail Gift Aid Stephen Maudsley Retail Gift Aid and Digital Donations Lead Charities, Savings and International Project Name: HMRC v1.8

HMRC - Gift Aid facts and figures 2015/16 Gift Aid relief paid out to the charity sector – £1.26 billion £70 million claimed through Retail Gift Aid scheme on donated goods Estimate of losses due to errors - £85million which increases to £170 million when taking into account avoidance and fraud. Tax to cover checks – 10% failure rate.

Retail Gift Aid requirements UK 200 Group Retail Gift Aid requirements Normally, Gift Aid only applies to gifts of money received from an individual However, in certain situations, Gift Aid can be claimed by Charities on the income from the sale of goods donated. The following conditions must apply: The private individual retains legal and beneficial ownership of the goods until they’re sold. the owner of the goods and the charity must both understand that the charity (or its trading company) is acting as the individual’s agent Tue 17 May 2016 3

Retail Gift Aid requirements UK 200 Group Retail Gift Aid requirements The Charity Shop The owner of the goods has the right to keep all of the net proceeds of the sale, but can choose to donate all or part of the proceeds if they wish Donations must be from an individual who is a UK taxpayer Goods must belong to the individual donor Donor must make a valid Gift Aid declaration and complete and agency agreement Tue 17 May 2016 4

Sale of donated goods & Gift Aid UK 200 Group Sale of donated goods & Gift Aid The Charity Shop The 3 ways that charity shops can convert donated goods into Gift Aid payments; Standard Method – Charity writes to donor when goods are sold & allows 21 days for donor to say they want some/all of the sale proceeds Method A – letter is issued when proceeds from donated goods exceeds £100 in a tax year* Method B - letter is issued when proceeds from donated goods exceeds £1,000 in a tax year* Tue 17 May 2016 5

HMRC “ We have a problem” A number of complaints received as to the operation of Retail Gift Aid Appeared to be widespread errors and mistakes in the application/operation of RGA, some potentially fraudulent. Contributing factors deemed to be : Lack of knowledge/understanding of staff/volunteers Bonuses, incentives and league tables linked to Gift Aid take-up possibly sending out the wrong message.

Proposed Action Work more closely with Charity sector, Charity Retail Association, Intermediaries etc. Produce revised/simplified guidance:- Chapter 3.42: of the Charities detailed guidance on the Gov.UK website.

Four important changes Operation of targets, league tables, bonuses, incentives or other forms of rewarding higher claims are unacceptable. Revised wording on the GAD making the donor aware that they are responsible for any shortfall in the tax to cover “End of year letters” detailing proceed from sales and Gift Aid claimed are now compulsory for all donors where charity uses methods A or B Shops must undertake spot checks/training of staff/volunteers to ensure that they are fully conversant with Gift Aid requirements.

Retail Gift Aid Declaration

UK 200 Group Gift Aid on Rag The Charity Shop Back in the summer of 2016 Paul Tate of Children’s Society and Nisyst their systems provider agreed a pilot Over the next few months Paul, Nisyst and HMRC worked closely together to ensure that their procedures were compliant. This has now been piloted within their Chorley branch and has been found to be worthwhile. Due to be rolled out to their other shops in the very near future Tue 17 May 2016 10

Gift Aid on Rag The same conditions apply as with retail Gift Aid UK 200 Group Gift Aid on Rag The Charity Shop The same conditions apply as with retail Gift Aid The charity must already have, established, robust procedures in place and staff must be fully conversant with handling of Gift Aided goods. If possible donated Goods/Rag should be sorted in a designated area free from non Gift Aided items to avoid cross contamination. Tue 17 May 2016 11

Gift Aid on Rag requirements UK 200 Group Gift Aid on Rag requirements The Charity Shop Recommend that Gift Aided Rag be stored in different coloured bags and , if possible, separate from non Gift Aided Rag. Recommend that donated Rag is weighed prior to collection. If Rag stored in same bag a control sheet must be maintained, detailing individual donors and weight. Adopted procedure can be either manual or electronic in line with current operational processes. Tue 17 May 2016 12

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