National Insurance 'should be an eligible tax for gift aid purposes'

17 Oct 2014 News

A report released today by nfpSynergy has called for National Insurance to be treated as a tax for gift aid purposes, so that more people will eligible for gift aid.

A report released today by nfpSynergy has called for National Insurance to be treated as a tax for gift aid purposes, so that more people will eligible for gift aid.

The report Give and let give: A briefing on gift aid and how it can be made better, released today by nfpSynergy, looks at the history of gift aid and makes four key recommendations for its future. It states that including National Insurance as an eligible tax for gift aid purposes would help tackle the impact of the raising of income tax thresholds to over £10,000 per year. The impact on charities is that donors who were previously eligible for gift aid are no longer, meaning that gift aid will be reaching fewer people, not more.

The research consultancy said that its suggestion to treat National Insurance as an eligible tax for gift aid purposes has the benefit that many donors in employment will pay National Insurance as the income threshold is much lower for income tax.

Charities should be responsible for reimbursing HMRC

Other key recommendations made in the report are that the charity, not the individual, should have to reimburse HMRC, if the individual does not pay tax. It states that eligible people sometimes do not sign off gift aid declarations as they are unsure if they do pay enough tax, and that the threat that HMRC could reclaim the gift aid from the individual is too great.

The report states: “Not only would making the charity pay back any ineligible gift aid remove at a stroke that risk for individuals, but it would almost certainly be a cheaper and quicker way of HMRC of getting back their overpaid tax.”

It adds that HMRC could simply deduct wrongly claimed tax from the next gift aid claim with “minimum hassle”.

Another recommendation is that online donations below a certain level, which nfpSynergy defines as £5 or less, should automatically qualify for gift aid. The report said that smaller donations are hard to claim gift aid on, due to the difficulties in getting a declaration signed online, and therefore making donations below a set level automatically qualify would be the “simplest and least bureaucratic mechanism to encourage further grown in online micro-donations”.

The reports final key suggestion is that the gift aid small donations scheme should be simplified, describing it as currently “hideously over-complicated”. It states that nfpSynergy supports any simplification of the scheme, in particular for small charities who “probably now find it hardest to use”.

One voice on gift aid

NfpSynergy concluded its report by saying that charities need to speak to the next government with “one voice on gift aid”, stating that the current problem is that there is no “single clear and authoritative voice on gift aid that the government can listen to”. It said that if the sector want to see changes in gift aid, all the key bodies need to agree what they are calling for and “agree who is the sector choirmaster on this topic”.

Joe Saxton (pictured), driver of ideas at nfpSynergy, said: “There is little doubt that gift aid has brought huge financial benefits to charities since 1990, making a monumental difference to their ability to do great work. That said, the system is nearly 25 years old and some reform is needed to make it even better.

“We’re calling for some amendments to the system, but also for the sector to agree what it wants and to come to the government with one powerful voice. There are millions of pounds to be had without having to ask people for any more money and with a potential change of government less than six months away, it’s crucial to start preparing now.”