CTG welcomes efforts to increase Gift Aid take-up
People giving to charity are being encouraged by the Government to declare Gift Aid on their donations, and boost the money that reaches their charity of choice at no extra cost.
The call comes after research showed that charities are losing out on potentially hundreds of millions of pounds in extra funding.
Exchequer Secretary to the Treasury, Robert Jenrick MP, said:
The UK has thousands of brilliant charities, all working hard to make people’s lives better. Through Gift Aid, we are already giving charities an extra £1.3 billion of funding so they can continue their important work.
We know how crucial this funding is. This is why we’ve just written to 50,000 charities to tell them about the Gift Aid Small Donations Scheme, which makes it even easier for charities to claim a 25% top-up on their donations.
The research, published today by HMRC, shows that a third of eligible donations made to many of the UK’s 200,000 charities did not add Gift Aid when they could have done. This means that charities are losing out on extra funding worth nearly £600 million a year.
Gift Aid allows charities and community amateur sports clubs (CASC) to claim an extra 25p for every £1 donated. To add Gift Aid to a donation, you must have paid income or capital gains tax that year worth at least the value of the Gift Aid being added and give the charity permission to claim it. Gift Aid costs no extra to add on to your donation.
HMRC is continuing to work closely with charities to ensure they get the most out of Gift Aid, including making sure their donors understand the rules, and they fully benefit from the support it gives. CTG is an active member of this Gift Aid working group.
HMRC has also written to 50,000 charities to promote the Gift Aid Small Donations Scheme, introduced in 2013, to explain how easy it is to claim a 25% top-up on cash donations. The scheme does not require a declaration to be made for donations worth up to £20, making it simpler for charities to get extra support through Gift Aid.
Research reports
- estimate the value of the Gift Aid tax gap and unclaimed Gift Aid by generating reliable estimates for the prevalence of charitable giving and the value it generates
- develop an understanding of correct and incorrect Gift Aid behaviours among donors
The research comprised of 1,377 telephone interviews with individuals aged 16 or older. Those identified as donors in the survey were asked questions about:
- the frequency and value of donations in the previous 12 months, and in the previous 4 weeks
- use of Gift Aid
- reasons for not using Gift Aid
- understanding of Gift Aid
- attitudes towards tax
- aptitude for form-filling
The evidence enabled estimates of the proportion and value of Gift Aid claimed correctly or incorrectly. Respondents were categorised based on whether they claimed Gift Aid ‘always’, ‘sometimes’ or ‘never’, and whether they did so correctly or not.
The report finds that overall, 25% of the value of donations made in the 12 months prior to interview did not have Gift Aid added to them where the donor was eligible, contributing up to £560m to the value of unclaimed Gift Aid. This represents potential missed income for charities and is generated by eligible donors who only sometimes (30%), or never (18%), add Gift Aid to their donations. It is mostly driven by a lack of opportunity to add Gift Aid, and to a lesser degree, by misunderstanding of Gift Aid and not recognising their eligibility to add it.
The report also finds that 8% of the value of donations had Gift Aid incorrectly added to them by ineligible donors, generating a Gift Aid tax gap of up to £180m. This is caused by ineligible donors who always (5%) or sometimes (10%) add Gift Aid, in part by a lack of understanding of the relief and in part by a misunderstanding of what it means to be a taxpayer, leading to ineligible donors incorrectly believing that they are taxpayers and therefore eligible to add Gift Aid.
It is suggested that there is an opportunity to reduce Gift Aid claims among ineligible donors and increase Gift Aid claims among eligible donors by improving knowledge. Providing information about (1) Gift Aid eligibility criteria (i.e. clarifying what it means to be a UK taxpayer and that the donor must be one to add Gift Aid to their donation) at each and every opportunity, and (2) information about the benefits of Gift Aid at the point of donation, could increase the likelihood of correct Gift Aid behaviour.
HMRC has set up a Gift Aid working group which will review the recommendations of the report although it is already:
- exploring options to maximise the amount of Gift Aid that charities can claim on donations that they receive
- exploring ways of increasing customer understanding of Gift Aid and how it works
- considering opportunities to improve the way that Higher Rate Relief is claimed
- considering all aspects of the relief to ensure that it works as intended, is future-proof and provides the relief in the best way possible