Charities propose Gift Aid reform to unlock £450m

25 Jun 2020 News

A coalition of charities has called for reform of Gift Aid rules to help relieve the financial pressure created by the coronavirus crisis.

The group is led by the Charities Aid Foundation, the Institute of Fundraising, the Charity Financial Group, the Charity Tax Group and NCVO, and includes support from a wide range of charities.

It has asked the government to change the effective tax rate applied to Gift Aid from 20% to 25%. They estimate that this move could unlock an additional £450m per year for charities at a time when fundraising income is falling sharply.

The change would be temporary, and run for two years from the beginning of the 2020-21 tax year.

Talking to government

The group has already raised the proposals with government officials including Baroness Barran, the charities minister.

They suggest that the proposed reforms could be modelled on the Gift Aid Transitional Relief scheme. This scheme, applied in 2008 after a cut to the basic rate of income tax, topped-up Gift Aid payments so that charities did not miss out on income.

The group argues that given levels of donations to charities are projected to fall as a result of the pandemic, the overall cost of the reforms will be relatively limited, and may be less that the total value of Gift Aid which is currently unclaimed.

They also propose permanently lifting the cap on donations eligible under the Gift Aid Small Donation Scheme from £8,000 per year to £10,000, which the group says will ensure financial support also reaches smaller charities who will not benefit so much from reforms to Gift Aid tax rate reform. 

Nudge

Peter Lewis, chief executive of the IoF, said: “Government support through Gift Aid is proven to be a significant nudge which increases people’s likelihood to give, and encourages people to give more.

“This package would be an incredibly clever way for the government to support charities and the services they provide, at the time when they most need it.”

Caron Bradshaw, chief executive of the Charity Finance Group, said: “The cancelled fundraising events across the country means that Gift Aid that would have been claimed has not been.

“We are confident that this move will help charities and, ultimately, will not cost government more than was projected in normal times.”

Limited changes so far

The Charities Aid Foundation has previously suggested tax reforms which it said could help charities to raise an extra £600m a year.

The government has already introduced a limited change to Gift Aid rules in response to the pandemic in April, by making unrefunded tickets to charity events eligible for financial relief.

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