Helen Evans, Finance Director at Making Music, recently attended the Charity Tax Group’s annual conference. Representatives from the HMRC Compliance Team were present and attendees were invited to submit questions.
Corporation Tax
On your behalf, we asked why charities with exempt and low levels of income were asked to complete Corporation Tax (CT) returns.
The response from HMRC officials was that HMRC is not deliberately targeting small charities, but no one is exempt from receiving a tax return request and HMRC is tasked to police the whole spectrum of charities.
Often, registering for Gift Aid and submitting a first claim will trigger a CT return request. If there is no tax to pay, it is unlikely that the charity will be sent another for a long time.
However, it was made clear that, even if there is no tax to pay, completing and submitting the return on time is non-negotiable. Also, the supplementary form CT600E must be completed and submitted to be eligible for exemption.
In the October 2024 Budget, it was announced that charities’ compliance with tax obligations would be tightened (under the Fit & Proper Person’s Test) but that the government would also bring forward a package of measures to simplify tax administration and improve customer experience in Spring 2025, with a focus on reducing the burdens for small businesses. One of HMRC’s strategic objectives for 2025 is to ‘make it easy to get tax right and hard to bend or break the rules’.
Making Music will continue to work with the Charity Tax Group to lobby HMRC for the improved design of the forms and guidance notes to make them more relevant and understandable for charities, many of which are run by volunteers who are not tax experts.
Member groups are encouraged to keep accurate, up to date accounting records, ensure the latest contact information is held with HMRC and respond to HMRC correspondence requests within the deadlines indicated.
Any members with concerns can contact the HMRC helpline 0300 1231073. Making Music can also help you through the process.
Gift Aid - common errors
HMRC also talked about some of the common mistakes they see with Gift Aid claims
- 90% of rejected Gift Aid claims are because the authorised official does not match HMRC records. Changing your authorised official is quite easy, as long as the existing authorised official is authorising it. If your group has lost contact with your authorised official, it becomes harder.
- Keep valid Gift Aid Declarations – one per individual (not Mr& Mrs), full first name, valid addresses & postcodes
- Payments must be from an individual
- Payments must not be for a service
- There must be evidence for the donation – traceable to the bank statement with analysis of aggregated donations
- Don’t confuse the requirements of the Gift Aid Small Donations Scheme with the main Gift Aid Scheme. See our resource for how to claim under both schemes.
Find out more information about how to claim gift aid
