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Budget gives Institute gift aid boost

Fundraising | Tania Mason | 4 Apr 2008

The Institute of Fundraising has secured three more years’ funding to continue operating its tax-effective giving initiative, which helps charities take advantage of gift aid and other tax reliefs.

The Institute also learned in last month’s Budget that it will receive government funding to establish an online mentoring forum around gift aid.

Over the next three years, the Institute will be charged with developing and marketing a training programme targeted at  charities with less than £1m turnover, to help them maximise their use of gift aid.  The Office of the Third Sector could not yet confirm how much the Institute would be paid for this work, though it has received £579,000 to run the tax-effective giving initiative from 2006 to 2008.

The repeat contract signals a revival in the government’s confidence in the Institute, which suffered a setback last year when the umbrella body had to hand back £4m it had been given to run a payroll giving project for small and medium-sized businesses. It had been unable to spend the money because not enough employers had come on board.

£300m reprieve

Alistair Darling’s 2008 Budget contained a welcome three-year, £300m reprieve for charities from the losses they were expecting to swallow as a result of the 2 per cent drop in income tax announced last Budget day (see Budget news gives sector £300m more in gift aid). Alongside this year’s Budget, the government also published its response to last year’s gift  aid consultation, which contained a raft of new measures that aim to simplify gift aid and encourage more take-up by charities and donors.

Among these was reform of the auditing process, which had been cited by some, especially smaller charities, as a major deterrent to embracing the scheme. In a bid to reduce the fear that a gift aid audit would uncover costly mistakes, the government has set an error level of 4 per cent, below which charities that claim less than £2,500 each year (two-thirds of charities) will not be penalised for book-keeping errors.

However, this is “not all it seems at first glance”, according to the Charity Finance Directors’ Group. Chief executive Keith Hickey said: “It is good news that with an error level of under 4 per cent there will be no recovery in prior years; however it is slightly disappointing that unless the amount [of error] involved is under £100 there will be a recovery in the year of the audit.”

Charities will now be allowed to repair errors at audit before the error rate is extrapolated across the claim, and a ‘yellow card’ system will be instigated to differentiate between errors found at first and subsequent audits.

In an effort to simplify claims from multiple events sponsorships, charities will be permitted to aggregate donations under £10 in claims up to a total of £500. Fundraisers will still need to obtain gift aid declarations for each donor, but won’t need to list each one on the claim form.

The government also plans to explore the possibility of allowing large charities that are operating “sophisticated error-free” schemes to have their gift aid claims verified by their external auditors. Small voluntary and community groups that are not registered as charities will also be able to claim gift aid if they are members of local umbrella groups that are charities, such as Councils for Voluntary Action.The government has launched a website specifically for gift aid information, at www.direct.gov.uk/giftaid, and is to develop a toolkit containing all the guidance needed to run a gift aid scheme.

However, the request from a coalition of sector umbrella bodies for a wholesale revamp of the gift aid system, so that it would be based on an assumption of the number of donors who are taxpayers, was not introduced. But the government indicated it would explore the idea further in future.  “Proposals for complex reforms require more time for consideration,” it said.

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Who's Who: Tania Mason