Audits by HMRC Charities - background

1 Introduction

1.1 We make only limited checks on repayment claims before tax is repaid.

1.2 To protect charitable reliefs, we need to ensure that only the correct amount of tax is repaid. So we test in more detail the accuracy and validity of a proportion of claims by auditing them.

1.3 Our auditors are here to ensure that all tax repayment claims are accurate and valid. This includes claims for Gift Aid tax relief, repayment of tax deducted from interest at source and tax on legacies received after tax has been deducted. Our auditors are concerned to help charities get things right and will also help a charity to make further repayment claims if we find that less tax has been claimed than was due.

1.4 Our auditors are not evaluated on the level of adjustments made or rewarded for the amount of tax they recover.

1.5 Charity trustees are ultimately responsible for ensuring that all claims are correct so they have an obligation to ensure that appropriate systems are in place to achieve that result.

1.6 Detailed guidance is available at Chapter 3 of the Detailed Guidance Notes for Charities on the records you should keep and how long you need to keep them.

1.7 The most common error found is a failure to ensure that valid Gift Aid declarations are in place.

2 Why has my charity been chosen for audit?

2.1 Claims for audit are generally selected for review on a ‘risk’ basis, which takes into account a wide range of factors. We also select a number of claims for review on a random basis. Charities making large claims will tend to be reviewed more frequently, because of the amount of money at stake.

2.2 If your charity’s repayment claim is selected for a review, it does not necessarily mean that we believe the claim is wrong or that we are suspicious about anything to do with the claim or your charity.