In 2013, HM Treasury published a consultation document ‘Gift Aid and Digital Giving’ outlining Government’s proposals to make it easier for charities to claim Gift Aid through various digital giving channels.

CTG was actively involved in the consultation process, participating in four working groups hosted by HM Treasury, as well as co-ordinating a consultation working group meeting with members and officials from HMRC and HM Treasury.

Gift Aid and Digital Giving consultation – Response by the Charity Tax Group (summary below)

The Government response in 2014 led to changes on legislation relating to intermediaries, updates to the Gift Aid Declaration and improvements to Gift Aid promotion. A proposal for a Universal Gift Aid Declaration was not progressed but the Government recognised that useful feedback had been generated.

CTG consultation response

CTG responded in detail to each of the 56 consultation questions – an overview can be found below.

Overview

• CTG welcomes the Government’s proposals to make it easier for charities to claim Gift Aid through various digital giving channels.

 Promotion of Gift Aid

• Gift Aid has been very successful for both donors and charities and it should be celebrated. The value of the scheme to charities should be promoted as should the message that Gift Aid is a simple and effective way to maximise a donation.
• We do not believe that wholesale reform or rebranding is needed, but support targeted improvements to simplify the Gift Aid system and incentivise the use of Gift Aid on all donations which are eligible for it.

Improvements to the Gift Aid declaration

• CTG welcomes moves to shorten the Gift Aid declaration as the current model declaration is cumbersome and overly long.
• In our view, shortening the Gift Aid declaration does not requires a shift in liability from the donor to the charity in the event that the donor has not paid enough tax to cover the Gift Aid. We are not convinced that a longer declaration makes donors any more aware of the liability that they currently face.
• Shifting the liability from donors to charities would raise a number of difficult questions relating to accounting issues, questions as to how liability would be spread among charities and the implications this would have for the tone of the declaration wording. In practice, many charities do accept the liability where insufficient tax has been paid, but this is their choice and we believe it should remain that way.
• We feel strongly that the introduction of a two-tier system of Gift Aid declarations would introduce considerable complexity and would be very difficult for charities to administer.  It would also potentially endanger enduring declarations which are very important for charities
• We much prefer the simplicity and certainty of retaining a single declaration whereby the liability for the “tax to cover” falls on the donor as at present, with the continuation of the policy whereby HMRC invites the charity to cover the shortfall. We recommend that the existing Gift Aid declaration wording be simplified and improved by removing the dates of the tax year, the reference to Community and Amateur Sports Clubs, and the sentence referring to VAT and Council Tax. This has the advantage of not requiring any legislative change and should present a relatively straightforward solution which is widely supported by the sector. Revised wording should be agreed by HMRC and the charity sector.  We also recommend that donors are asked how they react to the proposed changes, particularly on the question of liability and what will most incentivise them to complete a Gift Aid declaration.
• We also recommend that the Government re-evaluate the particular position of declarations for text donations and considers the “carry back” solution as a solution to the “tax to cover” problem (ie the tax relief on donations could be covered by income tax or capital gains tax paid in the previous four tax years).
• CTG would also ask for further consideration of proposals that written Gift Aid declarations should be able to be converted to the equivalent of oral declarations.

Intermediaries

• Charities are frustrated at present as it is not possible for a donor to use the same Gift Aid declaration to cover donations to different charities. It is also not possible for the object of a Gift Aid declaration to be anything other than a named charity. The consultation document includes specific proposals that are intended to help intermediaries administering Gift Aid, in order to make the process less burdensome for donors.  In principle, we welcome this approach.
• Proposals 1 and 2 in Chapter 3 go some way towards providing a solution to this problem, and to providing administrative savings for charities; but neither provides a completely satisfactory solution. We believe that it is essential that charities receive full donor information from the intermediary as well as the donation and the Gift Aid, which makes Proposal 3 the more attractive of the proposed solutions.
• We are clear that any time limit on declarations held by intermediaries is likely to be a significant disincentive for potential intermediaries and for donors to use this scheme.  A much better approach might be to require donors to be reminded of the need to consider their tax status each year asking them to withdraw their Gift Aid declaration where necessary.
• The question of liability for invalid declarations is a key concern that is not satisfactorily resolved in either of the proposals. Overall we believe that liability should be attributable to the intermediary where there was an error of process or in the presentation of the Gift Aid Declaration, where it was collected by the intermediary.  We do not believe the liability should rest with the intermediary where the donor simply provides incorrect information, whether in good faith or intentionally; in these circumstances, liability should rest with the donor, with the charity making up the shortfall if it wishes. In any event we anticipate that intermediaries are likely to seek recovery from the charities.
• In summary, we believe that a single scheme should be developed based on the advantageous elements of both proposals. Very importantly, it should operate in such a way that in all cases the donors’ Gift Aid declarations and therefore their details are passed to the charity. Again, we would stress the need for donor research to clarify whether this added complexity would be too confusing for donors.

Proposal for a Universal Gift Aid Declaration Database

• CTG members are generally supportive of a UGADD and would be interested in exploring how it could be developed. Our members feel that a UGADD could simplify some of the data collection and data quality issues which charities currently face.
• We are aware that various proposals have been put forward in recent years and many of these have interesting features which could be developed into an outline proposal for further consultation.  We think it important that the key components of Gift Aid, that have been so successful and are so valuable to charities, are protected. Questions also still remain about how practical a UGADD would be and donor research is needed to help clarify some of these concerns.
• In order for it to be effective, a single operator would be needed to administer the UGADD, paid for by fees from the charities using it (at a rate reasonable enough to make it viable to all charities regardless of their size). It could be viable even if only a small number of the larger charities used it but mass take-up would be preferred to avoid confusion. As the proposals stand, many charities are likely to treat the UGADD as an additional source of information to help ‘top-up’ their Gift Aid claims and would not expect the UGADD to be the main repository of declarations.  As such, there would be an element of parallel running of systems (resulting in additional  cost) but charities are likely to be prepared to put up with this increased complexity if, overall, the value of Gift Aid claims could be increased.
• Regulation is important because of the huge amount of taxpayers’ information that could potentially be held. There would inevitably be concerns about data security and these would need to be addressed by requiring the UGADD provider to have transparent and robust controls in place.
• We understand that HMRC has no current plans to create and operate a UGADD but we believe that in the longer term it would be best placed to operate such a system, particularly if donations could be cross-checked against the HMRC database of tax payers and the tax repaid only on donations where the individual had paid sufficient tax to cover. If such a database were developed it would effectively preclude the need for a traditional Gift Aid declaration. We would suggest that this is considered as part of future HMRC spending plans and Road Map. It would be hoped that reductions in fraud could help to finance the infrastructure costs that would be necessary and it may be possible for charities to help fund some of these costs in the immediate term.

 Next steps

•  We believe that a phased implementation of the various proposals in the consultation document is necessary to ensure a smooth transition and to allow for a dialogue between HM Treasury and HMRC and key stakeholders such as charities, intermediaries and donors.
• We recommend the development of a long term strategy and timetable for the development of Gift Aid which might be reviewed in detail, say, every five years.
• It should be possible to agree a shortened Gift Aid declaration within the existing legislation that would make it easier for charities to present the Gift Aid declaration (particularly on digital platforms) and make it easier for donors to understand.  This would hopefully increase the number of Gift Aid claims and should be complemented by efforts to raise the profile of Gift Aid.
• We cannot see any benefit in rushing the implementation of the proposals relating to intermediaries and the UGADD. It is important that any changes that are implemented work for the majority of the sector, are capable of being future-proofed (particularly given the continuing emergence of potential intermediaries and forms of digital giving) and will result in an improved user experience for donors (leading to increased Gift Aid take-up) and real benefits for charities in terms of reduced administration and continued positive relationships with donors.
• That said, we would not simply want these proposals to be discounted on the basis that they are “too difficult” and would welcome continued engagement from HM Treasury and HMRC with the sector through specialist working group meetings.
• We suggest that updated versions of these proposals should be presented for further consultation with donors, charities and intermediaries based on responses to this consultation.