The charity sector has a great opportunity to reform Gift Aid and maximise donations if it speaks to the next government as a combined force, a new report argues. ‘Give and Let Give’, written by research consultancy nfpSynergy, evaluates Gift Aid since its inception in 1990 and argues changes are needed as it has become too complicated and bureaucratic, particularly for the small charities it was specifically set up to help.

The report estimates that Gift Aid currently represents around 2% of charitable income, but points to the CAF estimate of £750m going unclaimed every year to argue that the system needs to be amended. It gives four key recommendations on how to earn even more money for good causes and calls for the sector to agree on suitable changes and lobby the government together as one.

The report recommends:

Making the charity reimburse HMRC, not the individual, if the donor doesn’t pay tax

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.

Simplifying the Gift Aid Small Donations Scheme

The small donations scheme is hideously over-complicated and riddled with caveats that make claiming funds with it very difficult. Simplification is vital, particularly for small charities, which probably now find it hardest to use.

Making online donations below a certain level automatically qualify for Gift Aid

Online donations of under £5 are very difficult to claim Gift Aid on, mainly because of the difficulties of getting a signed declaration. Making online donations below a certain level automatically eligible for Gift Aid would be the simplest mechanism to encourage further growth.

Include National Insurance as an eligible tax for Gift Aid purposes

The impact of the rising income tax threshold is that many people will stop having to pay tax, making them ineligible for Gift Aid. If National Insurance is treated as a tax for Gift Aid purposes, many more people will be eligible for Gift Aid, which will increase money for charities.

nfpSynergy’s Driver of Ideas, Joe Saxton, said:

“There is little doubt that Gift Aid has brought huge financial benefits to charities since 1990, making a monumental difference to their ability to do great work. That said, the system is nearly 25 years old and some reform is needed to make it even better.

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.”

Please see the attached full report for further details.

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