According to a newly-published HM Revenue & Customs (HMRC) guidance document, charity shops must make the procedure of selling items clear to potential donors.

Changes to the Gift Aid regime are laid out in the guidance, along with a template letter outlining the various methods of claiming Gift Aid.

Whilst charity shops will often ask people who donate items to make a Gift Aid declaration, charities cannot claim Gift Aid on donations of physical items, such as clothes or books; only on donations of money. However, charities can claim Gift Aid on donations of the income from the sale of supporters’ goods. In order for that to happen, the donor must retain legal and beneficial ownership of the goods until they are sold.

When the items have been sold, the donor can then donate the proceeds. The usual Gift Aid conditions apply, so the donor must have sufficient tax liability to cover the tax reclaimed under Gift Aid.

Charities that are affected by Gift Aid changes may find it helpful to discuss their financial issues with professional advisers that specialise in this area. For more information on how Milsted Langdon’s charities team can help, please contact us.