The cost of processing gift aid claims to HMRC has risen by more than half over the course of this year, it was revealed during parliamentary questions yesterday.

Economic Secretary Justine Greening told parliament that while estimates from March this year put the average cost of processing a gift aid claim was £5, the HMRC now estimates that the real cost is around £8 per claim.

Greening pointed out that the March estimate, which was quoted in a recent report on modernising gift aid commissioned by Charities Aid Foundation, did not include the payroll costs of staff involved in processing the claims.

The expense involved in processing sometimes low-value gift aid claims has been one of the ongoing issues in the debate around reforming the tax incentive, with the CAF report released last week citing it as a reason why Treasury has been reluctant to expand the system or extend transitional relief. 

Hannah Terrey, head of policy and public affairs at CAF, said: “The news that it is costing up to £8 to process each gift aid transaction, and not the £5 as previously thought, further strengthens the call for modernising the process.

"There are relatively simple steps that could be introduced today, such as allowing charities to submit claims online, which would reduce this burden. Looking ahead, the use of technology and a streamlining of the process could make further savings for HMRC and help charities to maximise the use of this important tax relief which saw £750m go unclaimed last year.”