Gift aid proposals could be 'non-starters', warns Institute1

Fundraising | Celina Ribeiro | 16 Dec 2009

The Institute of Fundraising fears that gift aid reforms mooted in yesterday’s government report could be “complete non-starters” as chief executive Lindsay Boswell reiterates concerns there will be action no on gift aid before the general election.

HMRC and Treasury yesterday released the findings of research into gift aid reforms aimed at increasing the proportion of higher-rate taxpayers who claim the full rebate and redirect that money to charities.

The study looked at two options: one which would see higher-rate taxpayers identify themselves via a tick box when making a donation, with the additional rebate going to the charity; another which would introduce a composite rate for all gift aid donations, fixed at either 30p or 37p per pound.

Boswell said that while the research was “much overdue” and “shows what fundraisers have been saying is absolutely right, which is that higher-rate donors are not motivated by the tax break”, he expressed concern at the report’s focus on the potential cost to government of gift aid reforms.

“One of the things that has come out is that the researchers believe that all of the proposals would change the tax break from being a tax break to being a spending decision. Therefore, from the Institute’s viewpoint, that makes them complete non-starters. We’d be deeply concerned about anything that jeopardised gift aid and that jeopardised gift aid being considered and looked at in the same way as any other government spending decision,” he told Civil Society.

He reiterated the point made last week that the fact that this research was released a week after the Pre-Budget Report indicated that gift aid reform was not high on the government’s agenda in the lead-up to the election.

“That’s deeply, deeply disappointing.

“We’ve been trying to forcefully make the point that the sector needs the support now, and it doesn’t look at the present time that we’re going to get that support.”

The Institute will be talking to the Treasury next year, and Boswell said the sector will be well-placed to argue for changes to gift aid on the back of the research with any future government.

Directory: HM Revenue & Customs (HMRC) | Institute of Fundraising
Who's Who: Lindsay Boswell

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Mark Astarita
Director Fundraising
British Red Cross
17 Dec 2009

The British Red Cross very much welcomes this excellent report, which reinforces our long-held view that almost every donor would wish the higher rate tax rebate to go to charities. Fundraisers have known this to be true in their hearts for ages now we have the proof.

The British Red Cross could benefit from any change to mechanisms suggested but would encourage the higher composite option be adopted of 37p/pound, which could be worth an additional £4m per year to us alone. At a rough guess the top 100 charities could see an extra £50m per year at the stroke of a minister pen. We know at least £200m goes missing because people don't reclaim it. Just imagine what charities could do with that extra cash.

I now very much hope that ministers will respond rapidly to move towards a fairer scheme and sincerely hope that they will also consider the interests of all tax payers including the 80% of tax payers who don't get a tax break from giving.

I hazard a guess if standard rate tax payers were asked an overwhelming majority would support all tax benefits from giving going direct to charities and not donors, just as HR tax payers have said loud and clear in this research that they support that to.

The issue for super donors who do reclaim does not give me great cause for concern as I feel sure they will adjust their personal giving into their foundations and trusts which will also be massively increased by the tax break now finding its way into their personalised giving vehicles. There is no loss of influence and there is just as much to give.

I have alway been perplexed by the notion that the HR tax break is particularly worthwhile or exciting to HR donors given one has to spend £1 to get 25p back off a future tax bill when it could far better increase the charity income so that for every £2 given £1 extra is topped up by HMG or under the composite rate just over £1 for every £3 given. The problem with the break is it lacks the emotional connection with the joy of giving and makes it a purely economic transaction and as a consequence is terrible boring for most people.

With 65% of High Rate Tax payers not even claiming the relief and pretty much everyone backing the change the time for action has to be now.

Mark Astarita
Director Fundraising
British Red Cross

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