Charities that claim Gift Aid on regular donations from people who have died will be asked to return the funds to the tax office, it has been confirmed.
The Charity Tax Group said His Majesty’s Revenue and Customs had clarified to Cancer Research UK that a Gift Aid declaration ceases to be valid when a person dies.
The situation is an issue where donations are made by standing order or direct debit and is understood to be a regular occurrence for major fundraising charities.
In a blog post published this week, the CTG said that when someone signs up to Gift Aid, that person is responsible for telling the charity when they stop being a taxpayer.
If that person does not tell the charity, it will continue to claim Gift Aid on their donations.
The CTG said that for the purposes of Gift Aid donations, a person’s assets become part of their estate and any tax relief afforded to the estate is in the form of inheritance tax relief.
“However, in practice, HMRC understands that charities continue to claim Gift Aid on donations in good faith until such time as they receive notification from the estate of the deceased,” the CTG said.
“In such circumstances there is an expectation that the charity would make an adjustment to refund the monies to HMRC on any donations they have claimed Gift Aid against once informed of the date of death of the donor.”
The CTG said the HMRC position had not been spelled out in guidance as far as it was aware.