Calls have been made to make the Gift Aid process simpler for charities and those donating
Charities are missing out on hundreds of millions of pound in Gift Aid.
Data from the Treasury has revealed that organisations are missing out on £600 million every year as supporters are not boosting their donations.
The figure has sparked calls that more needs to be done to ensure that charities promote Gift Aid, and to make it easier for charities to benefit.
Gift Aid allows charities and community amateur sports clubs to claim an extra 25p for every £1 donated.
To add Gift Aid, the person donating must have paid income or capital gains tax that year worth at least the value of the aid being added and give the charity permission to claim it.
Exchequer secretary to the Treasury, Robert Jenrick MP, said the scheme provides vital funding for the UK’s 200,000 charities, and it is important that organisations do not miss out on further funding.
“The UK has thousands of brilliant charities, all working hard to make people’s lives better,” he said.
“Through Gift Aid, we are already giving charities an extra £1.3 billion of funding so they can continue their important work.”
The government has pledged to write to 50,000 charities to promote the Gift Aid Small Donations Scheme, which gives an explanation on claiming a 25% top-up on cash donations.
Third sector bodies have said that more can be done to ensure charities receive the level of Gift Aid that they are entitled to.
Rhodri Davies, head of policy at the Charities Aid Foundation (CAF), said: “At CAF, we have been long term advocates of reforming Gift Aid to make it easier for charities to access its benefits. Such measures include using new technology to enable a one-off universal Gift Aid declaration that can cover all of a person’s subsequent donations, thus reducing the friction of giving via Gift Aid.
“There is also huge potential to use insights from behavioural economics to identify nudges that can have a significant impact on people’s willingness to use the system.”
Ruchir Shah, policy manager at the Scottish Council for Voluntary Organisations, said: “As income tax rates are now different in Scotland it is important that charities and government make it clear to Scottish donors that giving via Gift Aid is still straightforward and highly valuable for the causes they support.”
However changes to the Scottish tax system could result in further complications for Gift Aid in Scotland. Accountancy firm Chiene + Tait highlighted this week that low earners in Scotland may no longer pay sufficient tax to cover Gift Aid if they make regular donations.
“One potential consequence of the new Scottish tax bands is that lower-rate taxpayers who regularly give to charities may now owe HMRC extra money,” said the firm’s Catriona Finnie.
“While these may not amount to large sums of money, it may put people off making Gift Aid donations due to the level of complexity and the prospect of having to interact with HMRC.”
