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Charities: gift aid on waived refunds

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HMRC has amended its guidance Charities: detailed guidance notes on how the tax system operates to confirm that it now considers that donations can be made via a waiver of a right to either a refund or loan repayment and that such donations are eligible for gift aid. A waiver of a right to refund would include a situation where, for example, an individual bought tickets to a fund-raising event for the charity, and where the event was later cancelled and the individual waived their right to a refund of the amount paid for the tickets.

New chapter 3.45 of the guidance sets out that the donation will be considered to have been made at the date of the waiver and not the date of the original payment. The charity will need to maintain various records, including an auditable record of correspondence with the taxpayer, confirming that no refund is required and that the amount is to be treated as a donation.

Where the amount being waived is more than a nominal amount, such as a loan repayment, a legally enforceable document must be in place including:

  • details of what is being waived; and
  • confirmation the amount waived is to be treated as a donation for gift aid.

HMRC expects the charity to explain clearly to taxpayers that they have a choice between obtaining a full refund or waiving the right to a refund and have this classed as a qualifying donation.

Issue: 1530
Categories: News