Clause 3 will simplify the small donations scheme, making it easier for charities to operate while ensuring that the scheme delivers its original policy intention. It is about issues relating to community buildings. The clause also makes certain of the community building rules requirements more flexible, to give more charities the opportunity to benefit from the scheme. Clause 4 ensures that, for “connected charities” running charitable activities in community buildings, the rules retain the flexibility to claim top-up payments under the gift aid small donations scheme in the way that best suits their circumstances.
To explain the background, when the gift aid small donations scheme was introduced in 2013, the core principle was that each charity should be entitled to one allowance to top up their gift aid claims in circumstances in which asking a donor to complete a gift aid declaration was really not practical. As we have just discussed, that might be during a bucket collection or church service. The intention was also, most definitely, that the rules should operate as equitably as possible and not give manifestly unfair results when similar charities doing similar things in a similar way just happen to be organised differently. For example, the rules treat “connected charities” as if they are one charity for the purposes of the gift aid small donations scheme. It might help if I explain that, put simply, broadly charities are connected when they are controlled by the same people and have similar objectives. In that way, a charity is entitled to one allowance. For example, the head office and the regional offices could together register as one single charity, or each office or local branch could register separately. I am sure that everyone agrees that that is a fair and necessary rule.
Charities that regularly carry out charitable work in local communities are able to claim community buildings allowances in addition to the one core or main allowance. We want to ensure that, where a charity has a presence and is engaged in valuable charitable activities in our communities, such as in a church or village hall, it may claim a top-up allowance in respect of the local donations. Again, I do not think that anyone would argue that that was unfair. However, we have come to realise that the rules as cast do not always give the outcome that the Government want, or deliver on the intent of the scheme.
Some charities are able to claim many more allowances than others simply by virtue of the way in which they are structured, which is different, even though they might be carrying out similar activities in a similar way to the others. That disparity is acknowledged by the overwhelming majority of charities that can benefit from double allowances, as is the need to rectify the problem to restore the original policy intent.
The changes made by clause 3 will therefore make it clear that charities may claim one allowance, currently set at £8,000, or a community buildings allowance for each community building, with a maximum allowance for each building being £8,000. For example, therefore, a charity with three community buildings will, assuming that it has collected enough donations, be able to claim a top-up on £8,000 in respect of each of those community buildings. It will not, however, be able to collect an additional allowance in respect of any donations collected by its head office. That change will remove the scope for some charities to be able to double-claim allowances.
In making the change, we are adopting the approach that many respondents to the consultation suggested both as a way to ensure equity of treatment, and as a simplification of the scheme. In addition to simplifying the operation of the rules, the clause also makes the community buildings rules much more flexible and generous. At the moment, only donations actually made in the community building while charitable activities are being carried out count towards the community buildings allowance—that is, the amount of donations on which top-up payments may be claimed.
The Government, however, recognise—as I am sure we all do—that many charities carry out charitable activities in a community building, but collect donations to fund that valuable work outside the building itself, such as in collection tins in the local area. One hon. Member at least was taken back to his bob-a-job days with the scouts by our debate, but that is a perfectly good illustration of what we are talking about.
To enable charities in that position to get greater benefit from the scheme, therefore, clause 3 will allow donations made in the local authority area in which the building is situated to count towards the community buildings amount. As might be expected, a donation may only count towards one community buildings total, but the clause makes it clear that if a donation could be counted towards more than one community building amount—for example, if the charity had more than one community building in a local authority area—then, unless the donation was actually made in the building, the charity may decide to which building it is allocated. That means that charities with multiple community buildings will always be able to make best use of the total allowances available to them.
As I have explained, charities may claim one core allowance, or a community buildings allowance for each community building. They may claim whichever is more beneficial to them—that is what we want them to do. To ensure that the process for claiming top-up payments for charities is as straightforward as possible, a charity that is not connected with any others and collects less than £8,000 in small cash donations in total will not have to make a distinction between community buildings donations and other donations—a donation made anywhere, including within the community building, will simply qualify for the core £8,000 allowance. That will make things much easier for very small local charities to claim.
In practice, the Government anticipate that the vast majority of connected charities will be better off claiming under the community buildings rules, because connected charities are to be provided with an £8,000 allowance for each building, rather than a single £8,000 allowance to be shared between the group. So we have made that the default position. By designing the rules in that way, the vast majority of connected charities will automatically receive the most beneficial allowance.
Clause 4 will make life easier for most connected charities. They will simply collect up to £8,000 in or around their community buildings and submit a claim via HMRC’s Charities Online service, and a top-up payment will be paid into their bank account. However, we want the small donations scheme to be successful and for connected charities to have the freedom of choice to claim whichever allowance is more beneficial to them as a group. Where it is more beneficial for a group of connected charities to share a single core allowance, they may elect to do so by notifying HMRC. Where none of the connected charities in a group runs charitable activities in a community building, the amount on which allowances can be claimed would be calculated as it is currently. All small donations received are pooled and shared between the connected charities within the group. HMRC will be developing clear and detailed guidance in collaboration with the charities sector to help charities to determine how the new rules will apply to them, and how they can best use them.
To summarise, clauses 3 and 4 restore parity of treatment for comparable charities, and so deliver a fairer outcome. Charities can claim under one or other element of the scheme, but not both. Charities with community buildings have the freedom to claim top-up payments under the gift aid small donations scheme in a way that best suits their individual circumstances. For many charities, the rules will be simpler to operate and, given the relaxation of community building rules, more generous.
I shall try to keep my comments brief. Clauses 3 and 4 relate to the community buildings rule. Additional top-up payments may be made to those charities that meet and collect small cash donations in a community building. Every charity is entitled to an £8,000 a year allowance. Charities that carry out charitable activities in one or more community buildings can claim additional top-up payments of £8,000 per building subject to certain criteria. As the stewardship comprehensive guide to the scheme explains:
“A community building is a building, or part of a building, to which the public or a section of the public have access at some or all of the time.
So, a building which is kept locked other than at the times that Sunday services are held will qualify, provided that the public have access to it when it is open for public worship. Equally, if a church rents space in a local community centre on a Sunday morning, for the purpose of Christian worship, provided that the public have access to it, the use by the church on a Sunday will mean that the parts of the community centre used exclusively by the church will qualify as a community building.”
The community building is eligible if the charity carries out charitable activities on six or more occasions in the tax year with a group of at least 10 people. Clauses 3 and 4 would make a series of changes to the rules governing community buildings. Clause 3 would allow a charity to claim up to £8,000 from small donations raised anywhere, or up to £8,000 from donations collected from each community building it has. In the latter case, donations would include those made in person in the local authority area in which the community building is situated. Clause 4 affects the rules for connected charities making claims under the scheme where one or more of the charities run charitable activities in a community building. The House of Commons Library briefing paper summarised the change, stating that a group of charities will be entitled to claim
“up to £8,000 small donations made in the local authority area in which each community building is located.”
Alternatively it would be able claim
“up to £8,000 small donations made anywhere in the UK.”
As the first would generally be more beneficial, that would be the default option. The Opposition are very happy to support these changes to the rules governing community buildings. However, the Charity Tax Group has raised one point. It has called for a review of the requirement for there to be at least six events a year in a community building, and that they must be attended by at least 10 people. The group said that the rule is “arbitrary” and “impractical” for many charities, especially those in isolated community buildings or that have peaks in use, for example. Could the Minister use this opportunity to address the Charity Tax Group’s concerns about that rule? Other than that point I have no further comments.
The issue is really about the balance that we are trying to achieve. It is about trying to ensure that we keep a light touch in terms of what we ask of people claiming under the scheme. We feel that a reasonable balance is struck by the requirement that charities must carry on their charitable activities six times a year and, as the hon. Lady said, to be attended by at least 10 people. Most charities that are regularly active in most communities should be able to meet the requirements. It is not so generous that it is easy to contrive to meet it, and this is the issue. There will be other opportunities, in our debate on the Bill, to talk about striking that balance, but it is important to remember that protecting our precious charities means ensuring that we do not allow the rules to be so easily circumvented that abuse is widespread and that charities and the sector attract criticism for it.
We feel that this is a reasonable balance to strike. It is a light-touch requirement, but it is important to ensure that people do not contrive to work around it.