Forty three per cent of people are not eligible for gift aid because they do not pay enough income tax, the Charity Tax Group annual conference heard yesterday.
Cathy Wilson, head of charity policy at HM Revenue & Customs, told the conference that increases in the personal allowance meant the number would fall further, and that charities must manage their donors carefully to avoid having to repay tax.
HMRC recently estimated that of just over £1bn paid out in gift aid, around £50m had been on donations where the donor had not paid enough tax.
Technically in these cases the donor is liable to pay back the gift aid to the government, but in practice the charity usually pays.
“You will have to manage your donors carefully,” Wilson said. “Just because five years ago someone told you there were eligible for gift aid doesn’t mean they are now.”
General power to change gift aid
Wilson also told the conference that HMRC will develop “overarching powers” that will allow it to make changes to the gift aid regime in the future without seeking the approval of Parliament.
She said the powers were needed because of the rapid change in how donations were made, and that HMRC wanted to future-proof systems against new donation mechanisms.
“We will hopefully be developing Finance Bill clauses in September,” she said.
New gift aid declaration
Wilson also said that HMRC is beginning work on developing a new gift aid declaration in partnership with the Nudge Unit, a social enterprise spun out of government which works on innovative ways to change public behaviour.
HMRC is undertaking “customer closeness” sessions with donors to understand how they respond to different types of declaration, and will also test new declarations in a live environment with real charities.
She said she hoped to introduce a new gift aid declaration later this year.
Richard Bray, regulatory and taxes manager at Cancer Research UK, told the conference that his charity had tested different gift aid declarations with supporters, and found that a shorter declaration was the most understandable.
Universal gift aid database on hold
Kevin Russell, technical director of Stewardship, which supports donors who give to Christian charities, told the conference that any plans for a universal gift aid database in which all donor details could be stored were on hold for the foreseeable future.
“We’ve been told we should concentrate on other things for the time being,” he said.
He said there had been a number of problems with developing a database. These included how it would communicate with HMRC’s database and with charities’ own records and who would be liable for errors. The database also faced data protection issues because government had said it would not be willing to run it, and cost issues about who would develop it, run it and maintain it.
