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HMRC have confirmed that they are now able to pay the gift aid supplement on charitable donations, as announced in the 2008 Budget.

For donations made by donors on or after 6 April 2008, charities will claim gift aid repayments at the new basic tax rate of 20 per cent but they will also be entitled to a transitional relief worth 3p for every £1 donation they receive under the gift aid scheme. This transitional relief has been provided by Government to allow charities to adjust to the fall in basic rate tax from 22 per cent to 20 per cent, and will be paid in respect of all qualifying gift aid donations made to charities between 6 April 2008 and 5 April 2011. This means that for every pound donated under the gift aid scheme the charity will continue to receive 28p. Charities don’t have to do anything extra to benefit from this transitional relief as HMRC will pay it automatically along with gift aid tax repayments.

Since both the Finance Bill 2008 and the Appropriation Bill 2008 have now received Royal Assent, HMRC can now pay the transitional relief in respect of donations made to charities since 6 April 2008, on which a claim to gift aid repayment has already been made.

In future, when HMRC make a tax repayment on gift aid donations made on or after 6 April 2008, they will automatically pay gift aid transitional relief (where it is due) in addition to the tax the charity has claimed.