Sector to lose £400,000 from scrapping of tax return tick-box

Fundraising | Tania Mason | 25 Mar 2011

The scrapping of Self Assessment Donate, the mechanism for giving income tax repayments to charity via the tax return, which was announced in Wednesday’s Budget but not given much attention, will see the sector lose around £400,000 a year.

SA Donate allows people to tick a box on their tax return and gift some or all of their tax repayment to charity. The government adds an extra 28p per £1 in gift aid. According to Baker Tilly, it tends to be larger charities that benefit from the mechanism.

But after 5 April 2012 SA Donate will be scrapped in favour of a new online gift aid claims-filing system.

Baker Tilly has connected the two things and said that charities will effectively pay for the setting up of online gift aid with the loss of SA Donate. Charities have been unwilling to contribute to the cost of developing the necessary software and HMRC has said it does not have the budget either.

John Conlan, head of charities tax at Baker Tilly, said: “Sacrificing SA Donate to pay for an online gift aid system is, in effect, forcing charities to pay for it.”

However, while charities will lose £400,000, the government will only save itself the gift aid it pays on donations made which would likely be no more than £100,000. If an online gift aid system enables the sector to claim even an extra 1 per cent of the tax relief that currently goes unclaimed, this could add £10m to its coffers.

Meanwhile HMRC has confirmed that only those charities that have been registered with it for three years will be eligible to claim automatic gift aid on small donations totalling £5,000 without signed declarations, as announced in the Budget.

Directory: HM Revenue & Customs (HMRC)

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