Research Consultancy Suggests Reforms to Gift Aid

The next government should consider a range of changes to the Gift Aid scheme to maximise the benefit of the programme, research consultancy nfpSynergy has suggested. 

Gift Aid is a scheme which enables registered charities to reclaim tax on a donation made by a UK taxpayer, thereby increasing the amount of the donation.

It is estimated that Gift Aid currently represents 2% of overall charitable income, and argues that the system needs to be amended, in part due to a recent estimate by the Charities Aid Foundation (CAF) that £750m a year of funding goes unclaimed. 

The shortfall is in contrast to recent findings that have shown the annual income of charities rose 5% year-on-year in September.  This puts overall charity income at £64.05bn, with the increase being greater within the largest of charities. 

To improve the current system, the report says that online donations below a particular level should automatically qualify for Gift Aid, and charities themselves should be responsible for reimbursing HMRC rather than individuals

“Having to pay back HMRC is a strong barrier preventing people signing up to Gift Aid.  Changing this would remove that barrier and make it cheaper for HMRC, as they could simply deduct unpaid tax from the next Gift Aid claim with minimum hassle,” nfpSynergy said. 

The report also recommends including National Insurance as an eligible tax for Gift Aid. 

Joe Saxton, the main voice behind the consultancy’s report, said Gift Aid still offered huge financial benefits to the charity sector.

He said: “We’re calling for some amendments to the system, but also for the sector to agree what it wants and to come to the government with one powerful voice.  There are millions of pounds to be had without having to ask people for any more money and with a potential change of government less than six months away, it’s crucial to start preparing now.”

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