Charities missing out on millions in Gift Aid

Gift aid cropped  wide

​Gift Aid income on the up, but billions more goes unclaimed

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6th August 2016 by Graham Martin 2 Comments

Charities recouped a record £1.26 billion in Gift Aid tax relief from HMRC last year – 20% more than they did five years ago but still less than half the total available to them.

Law firm Wilsons, which compiled the figures, says that this upward trend in Gift Aid relief demonstrates that third sector groups are becoming more adept at leveraging the potential of Gift Aid through better marketing of the scheme to donors.

And while this is welcome news, it could just be the beginning and there is plenty scope for more gains.

According to the Charities Aid Foundation (CAF) a total of £10.6bn was given to charities by individuals in 2014, the latest year for which figures are available.

Some of the innovative ways charities are boosting donor participation in Gift Aid

· Giving donors who sign up to Gift Aid personalised tags to attach to charity bags containing donations of items such as clothes, which can earn them points on well-known high street loyalty cards in the process.

· Offering the option to buy tickets to historical or cultural attractions with or without Gift Aid attached, while promoting the Gift Aid option.

· Pro-actively asking donors if they would like to apply Gift Aid to sale prices of donated clothes, books and furniture - as well as cash donations - and training staff to explain the benefits.

· Including Gift Aid declarations as an integral part of application forms for annual subscriptions or membership.

· Saving individual’s Gift Aid status on databases for subsequent donations, which the individual can review if they later want to opt-out.

On this basis a theoretical £2.6bn could be re-couped, although this is an absolute maximum.  

The number of charities reclaiming Gift Aid has also hit an all-time high, with 70,820 doing so last year, up from 68,700 the previous year and 66,370 five years ago.

Gillian Fletcher, director of charity law and governance at Wilsons, said: “Charities have become far more savvy about harnessing the power of Gift Aid to give a major boost to their resources.

“They are now marketing the scheme highly effectively, training their staff to actively promote the benefits to donors and implementing more sophisticated systems – both online and offline – that make it far easier for taxpayers to opt-in.

“Charities have a duty to donors and beneficiaries to maximise the impact of each donation to ensure every pound they are given stretches as far as possible and they have mastered the art of using Gift Aid to do so.”

She added: “This is a sensible and acceptable way for charities to substantially raise their income by capitalising on the generosity of donors.

“The soaring value of Gift Aid, and the growing numbers of charities reclaiming it, is a reflection that charities are now being run in an increasingly professional, business-like way.

“The figures suggest, however, that there is still some way to go before charities maximise on the revenue opportunities Gift Aid provides.”

Gift Aid is a UK tax scheme which enables charities to reclaim income tax on charitable donations from UK taxpayers, which effectively increases the amount of the donation by an extra 25p for every £1 given.

Higher rate taxpayers can reclaim the difference in tax between their rate of income tax and the basic rate charities claim on their donation, via their tax returns. 

The scheme was first introduced in 1990 by the then chancellor John Major.

6th August 2016 by John Brady

Gift aid introduced by John Major in 1990? Sorry but a decade out. Introduced by chancellor Gordon Brown!

8th August 2016 by RealFreedom

Er, no. Gift aid was introduced by Major in the Finance Act 1990, but it was then limited to gifts of £600 or more. The minimum donation limit was removed by Brown in 2000.