Charity fundraising: Loan waivers and refunds can now be Gift Aided

HMRC has confirmed that Gift Aid can be claimed on Waived Refunds and Loan Repayments, and that this can be applied retrospectively.

This a significant change, particularly for loan waivers: until now, where a lender to a charity confirmed they didn’t want their loan returned, HMRC would not accept the waiver to be a “payment”, and blocked the additional 25% benefit of gift aid.  

HMRC made a temporary concession in April 2020 for charity events cancelled as a result of Coronavirus, so that where donors converted their tickets to donations Gift Aid could be applied. This was a welcome benefit for charities under strain due to COVID-19.

That temporary concession has been confirmed by HMRC now to be permanent, which means that any such waivers of refunds, including waivers of loans to charities can count as donations to which Gift Aid can apply. There are, as you’d expect, conditions to be followed, including that there is a clear agreement between parties to waive the loan/right to a refund which is irrevocable.

Specifically, there must be documentation to support the formal waiver, which is to be held by the charity, whilst ensuring all other Gift Aid rules are met.

The date of the donation is the date of the waiver, and not the date of the original payment, and a Gift Aid declaration must be received by the charity (if one is not already being held for the donor).

What qualifies as a waiver?

Just what HMRC accepts to be a formal waiver depends on the amount being waived. For example, where the amount being waived is in relation to tickets to an event, the tickets are all that is required. The charity should also keep suitable audit evidence of correspondence between the charity and the taxpayer, confirming that no refund is required and that the amount is to be treated as a donation. The definition of correspondence includes emails, a letter to the taxpayer and their response or a recorded telephone call.

What about larger amounts?

Where the amount being waived is much larger than the example above, HMRC expects a legal document to be available. The document should include information on the amount being waived, whilst making it clear that the lender is giving up all legal rights to any future repayment, and lastly that the amount waived is to be treated as a donation for Gift Aid.

Charities should make sure that they keep a copy of the agreement for audit purposes!

If you’re unsure how this affects you, please get in touch with a Larking Gowen advisor for assurance and guidance. You can find contact details on the Our People section of our website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Amy Calver ACA

Credit:

https://www.gov.uk/government/publications/charities-detailed-guidance-notes/chapter-3-gift-aid

https://www.charitytaxgroup.org.uk/news-post/2021/new-hmrc-guidance-claiming-gift-aid-waived-refunds/