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Self-assessment donations fall since launch year

Fundraising | Gemma Ware | 7 Feb 2008

A government gift aid scheme that allows people who submit a self-assessment tax form to donate part of any tax relief due them to charity, is generating less for charities than it did when it launched four years ago.

Taxpayers who fill in self-assessment returns can opt to donate part or all of their repayments to charity by using the SA Donate scheme, which has generated £1.6m for charity since its launch in 2004.

The scheme also allows higher rate taxpayers who receive money back in tax relief on charity donations, or on gifts of land or shares to charity, to donate their rebate straight to charity.

But while charities benefited from £575,902 in the first financial year the scheme operated, this fell to £364,659 in 2005-6. Although the amount rose to £462,630 in 2006-7, in the first nine months of 2007-8 charities received just £213,851, although this omits figures from the year end when many taxpayers submit their assessment forms.

Taxpayers can also ask for their donation to be gift aided and around 80 per cent do, meaning the £1.6m total includes £302,055 given out in gift aid since 2004.

Charities can only benefit if they register with HM Revenue & Customs for a special tax code, which the taxpayer then inserts into a designated box on their tax return. While 37,605 charities registered for a tax code in the first year, the number of new registrations has fallen off, with 1,516 registering in 2005-6 and 1,113 in 2006-7.

The drop off comes despite a move by HMRC to make the SA Donate scheme compatible with the new short tax return. For the first year of the scheme the short tax return did not include the facility to use SA donate, but this was introduced from 2005 onwards.

Kate Sayer, partner at accountancy firm Sayer Vincent, said the SA Donate scheme was not widely known about or understood. She said it wasn't "a particularly attractive option" for taxpayers as people were asked to tick the box to donate any repayment before they knew its value, leaving the amount rather open-ended.

Speaking at the CHASE conference last week, Andy Jones, senior manager in HMRC’s charities team, indicated that the sector should expect a shake-up to gift aid in the Chancellor’s Budget on 12 March.

He said HMRC was “waiting as eagerly as anybody else” to find out what the full extent of the changes would be, but said work was still being done behind the scenes with staff being told by ministers to “be more imaginative”.

Jones also revealed that by 2011 information about gift aid would no longer sit on HMRC’s website, but individual donors will be directed to www.directgov.uk and corporations and businesses to www.businesslink.gov. However, there is still uncertainty over where information targeted at charities will sit and when it will be transferred from HMRC’s site.

Jones said HMRC would also release a new R68 gift aid form and new toolkits for charities, but that these would not be published before 6 April for fear of adding to the confusion surrounding the impending change in income tax.

While £230m had been claimed in gift aid the first year it was introduced in 2000, Jones said it should exceed £900m in 2008.

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