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Gift aid small donation scheme is no gift for small charities

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Gift aid small donation scheme is no gift for small charities1

Fundraising | Niki May Young | 18 Oct 2012

Niki May Young helps to run a small charity. She believes the gift aid small donation scheme is too exclusive to help the majority of charities like hers.

I help to run a charity which undertakes almost all of its activities on a voluntary basis. There are six or seven of us who offer our help on and off whenever it is needed, in any way we can. This year we've seen significant challenges as one of our key members is struggling to build his business, another is working multiple jobs to help provide the best life possible for his unborn child, and other members are facing similar personal and professional commitments. We each struggle to dedicate as much time as possible to the charity, which provides vital support to thousands of people in communities across Africa by funding rural schools.

When hearing about the gift aid small donation scheme (not to be confused with gift aid, of course), I was impressed with the government. I don't mind saying that this is a rare event for me. But I was. I thought, "Good on them, they've really tried to help out the little guy!" My charity is often overwhelmed by the generosity of people at our fundraising events who pop a fiver or tenner in our collection pots. "Someone put in twenty quid!" is a common exultation as we count the pennies, which go a significant way to helping our beneficiaries. I imagined counting all the money, filling out a simple form, and reaping the rewards. But I'm afraid to say, the longer the discussions about the Bill have gone on, the more my view has turned.

From what I've seen I don't believe that the scheme will reach those that need it most. Despite the obvious angle of aim at small charities, applying to cash donations of under £20 (recently increased from £10), and with an annual limit of £5,000 (giving a maximum boost to the charity of £1,250), HMRC has produced a burdensome Bill that will require years of commitment before it applies to most small charities, and their voices are not being heard.

Attending the public bill committee meeting earlier this week which heard the views of a number of interested parties, from charities and umbrella bodies to HMRC and the Treasury, I was struck by the lack of small charity presence. Of the 15 organisations invited to present their views, only one charity earning less than £1m per year was there. If the government wants to make life better for small charities by introducing this Bill, why doesn't it want to hear from them?

Make sure to donate separately! 

Sajid Javid, Economic Secretary to the Treasury, was there to receive a grilling from the committee members. I was hoping for some clarity, some let-up on the restrictions of the Bill, but I left in dismay at the expectations of the Treasury.

For example, Javid said that charity members would have to employ common sense in deciding what money could be claimed for. He gave the example of a £50 note in a bucket - it shouldn't go towards the total applied for, he said, because it's most likely been added by one person, while two £20 notes would likely have been submitted by two people. I disagree, and find this presumptuous. Don't you often club in together when paying at a restaurant? The same applies at charity events. But more importantly, I can imagine the scene put into context: A family of three want to add a £50 donation to our charity's bucket, and the vigilant volunteer begs, "Please don't, we won't be able to claim the GASDS funding if you do, do you have two twenties and a ten?" Or the discussion as we total up the takings of the day. "I saw three people put their name to that money." "Well, sorry, we can't possibly add it to GASDS donations, the HMRC will find out."

The HMRC's fear is fraud, it says. It caught £10m of fraud through gift aid last year and wants to link the scheme to gift aid in order to prevent or limit fraud under GASDS. In doing so it plans to require three years' history of successful gift aid claims in order to be eligible for GASDS payments. This is despite the low risk of fraud provided by the cap of £1,250 per charity. The reason it gives for this is to prevent organisations setting up numerous false charities and claiming on each. Surely the HMRC can find other measures to control such events? One speaker at the public committee meeting mentioned linking claims to residence at an address for three years. This sounds reasonable to me!

In addition larger charities or organisations such as the Church of England that already exist don't need to meet this requirement for every small branch that would be able to claim the donations, it only needs to be met by the parent charity. Small charities are at a disadvantage. 

I can't help but believe that by making the process so exclusive, the government is deliberately limiting the scope of those it would help, in order to limit the damage to the public purse. Currently only 65,000 of the 180,000-odd registered charities in England and Wales claim gift aid. That's a pretty huge whack of charities being excluded from the off, and I would bet my bottom dollar that the majority of them fall into the small charity bracket, the ones that are most in need of this small boost. After all, £1,250 can make a huge difference to a small charity but could equate to the stationery bill of a larger charity. My guess is that most larger charities wouldn't bother either. 

As the Bill stands, I know that the volunteers at my charity would be too daunted to attempt to benefit from this scheme, too time-deprived to persevere with it, and would most likely not qualify in the first place. The HMRC's treatment of this Bill so far is the equivalent of an architect that has been asked to design a bathroom, and has instead designed a water park. Let's take it back to basics, shall we?

Peter Munro
18 Oct 2012

If anyone at the Treasury really believes that charity treasurers will be conscientious enough to count £50 notes separately from other 'small' donations, they obviously have no idea how most treasurers work. Most will forget such a silly part of the regulations, others will ignore it, and the remaining few who are both conscientious and diligent are probably working for a tiny charity that never sees a £50 note in a collection.

I doubt it'll be a problem in Scotland anyway, in all the years that I've been a Treasurer, I've only seen one £50 note - they are so uncommon.

I doubt this is a major issue, what is far more worrying is the requirement for 3 unblemished years of claiming gift aid. Not only is this complicated to administer but it's also unfair to smaller charities, many of whom don't find it cost effective to join the scheme or claim gift aid. Few charities start claiming gift aid as soon as they are founded. To get 3 unblemished years, a charity has to have been going for at least 4 years, so why not make it easier all round and say that GASDS is available only to charities that have been running for 5 years and have not been convicted/penalised for fraud ?

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Niki May Young

Niki May Young was employed by Civil Society Media as website editor from March 2010 until July 2013.

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