Charities' fraudulent gift aid claims top £20m in two years, says HMRC3

Fundraising | Tania Mason | 24 Jul 2012

HMRC has detected and foiled fraudulent gift aid claims from charities totalling more than £10m in each of the last two years, and is considering prosecuting a number of those organisations.

John Kington, the head of HMRC’s charities technical team, confirmed the figure in a letter to the Hospital Broadcasting Association earlier this month, in response to a Freedom of Information request.

The Association had filed the request on 27 June, asking HMRC for any available statistics regarding the amount of detected and/or suspected fraud against the gift aid scheme in the last five years.

In particular, it wanted to know the number of fraudulent claims in each year and the amount claimed fraudulently in each year.

HMRC refused to publish the details requested, saying that to do so would assist the fraudsters’ efforts to cheat the government out of tax receipts.

However, Kington did provide some details outside of the FoI Act:

“HMRC has received several hundred fraudulent claims or attempts to register for gift aid over the last two years, some of them linked,” he wrote.

“Included in these is over £10m in fraudulent claims from charities in each of the years to March 2011 and 2012 which were identified by HMRC risk-assessment processes before repayment was made.”

Asked what action is now being taken against these charities, a spokesman for HMRC told civilsociety.co.uk: “The action taken will depend on the circumstances. Wherever possible we look at taking criminal proceedings against people who carry out fraud against gift aid. Where fraud is carried out by someone within a charity and the charity was unaware of the fraud the charity would not normally lose its entitlement to tax reliefs.”

Pressed on whether any action has already been taken and which charities are under suspicion, he said a number of cases are being considered for criminal prosecution, but he could not discuss individual cases.

Directory: HM Revenue & Customs (HMRC)

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Howard Lake
Director
Fundraising UK Ltd
24 Jul 2012

Thanks for putting that in context Karl. Yes, £20m is dreadful and needs addressing.

But, in context, either charities are appallingly inefficient at learning from their 'better' for-profit role models and ripping off the taxpayer (why oh why can't charities be more like businesses, I believe I've heard once or a thousand times); or actually they are pretty reliable and trustworthy.

With my charity business hat on, I think I know how I'd spend my limited investigative budget for the biggest and fastest return.

[Reply]

Ian Clark
Director
fundraising strategy
24 Jul 2012

Interesting comparisons Karl.

As Gift Aid tax refunds to charities are roughly £1,000m a year, the charity fraud rate could be even lower risk than 1.9%, even as low as 1.0%.

Speaking as a UK taxpayer I want to say "Well done" to HMRC for being so vigilant against fraud, saving the government unnecessary expenditure, and the rest of us higher taxes.

What would be helpful would be for HMRC to publish guidance on the most frequent "honest mistakes" that charities make in their claims. That way we might catch more errors before they are submitted, saving charities and HMRC wasted time and expense in dealing with them.

[Reply]

Karl Wilding
Head of Policy, Research & Foresight
NCVO
24 Jul 2012

£20m in attempted fraud against the tax payer in relation to Gift Aid is £20m too much. HMRC are to be congratulated for addressing this.

It's worth thinking about context here: I reckon that's 1.9% of the total amount paid out in gift aid paid by HMRC. As a level of risk, that sounds low to me.

HMRC's stats on the 'tax gap' as it pertains to corporation tax suggests that in 2007-08, £1.3 billion was missing from large businesses, equivalent to 5% of their corporation tax liabilities. For SMEs its £1.4bn, equivalent to 10% of corporation tax liabilities. See http://www.hmrc.gov.uk/stats/mtg-2011.pdf (p48 onwards)

If I read these estimates correctly (and I may not have), it sounds like gift aid is a low risk when it comes to fraud. Who'd a thunk it?

[Reply]

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