Recent statistics on gift aid may tell a more positive story than may appear at first sight, according to Ian Clark.
My confess my heart sank when I saw the civilsociety.co.uk headline 'Total gift aid claim value falls for second consecutive year'. But when I dug below the surface of HMRC’s statistics, the underlying story is actually one of growth, not decline.
It is true that HMRC’s Charity Statistics Table 4 shows total gift aid tax repayments dropped from £1,052m in 2011/12 to only £1,002m last tax year. But as table 1 explains, this is entirely due to the loss of transitional relief payments due from prior years, when the government kindly made one-off grants for three years to cushion the blow of basic rate income tax falling to 20 per cent in 2008.
Core gift aid tax repayments grew from £960m in 2010/11 to £1,000m the following year, and £1,040m last tax year. That’s 8 per cent growth in two years, ahead of inflation, and in times of austerity! Well done to all those fundraisers who continue to convert more donors to tax-effective giving. Without them the sector would be £1bn a year worse off.
Growth may be greater
In fact, the underlying growth may have been even greater.
Last year HMRC Charities had to implement staff cuts to meet government austerity targets. As a result gift aid processing got slower, particularly as they prepared for the big switchover to Charities Online. So the reported repayments totals may have suffered from the backlog that occurred in processing claims.
That may also explain why there was an unexpected reduction in the number of charities being repaid, as HMRC’s in-tray got larger. So this year’s figures may show another one-off improvement as Charities Online speeds up processing times. We may need to take next year’s headline totals with a pinch of reality as well.
The article also highlighted that the number of charities that had claimed more than £1m in tax refunds last year had fallen from 120 to only 100. But the number of charities in any one “tax refund band” fluctuates up and down quite naturally from year to year, as Table 4’s decade of data demonstrates.
If several charities mount major appeals in a year, they may jump a band and then subsequently fall back. In addition, to preserve tax confidentiality, HMRC round all their charity numbers to the nearest 10, so the actual figures may have only dropped from 115 to 104 – a 10 per cent drop rather than 20 per cent.
HMRC’s rounding can be seen at work again in Table 8 that deals with Payroll Giving. Tax refunds appear to have leapt by 33 per cent last year, from £30m to £40m. Great news you think. Real headline material. But look at the figures for the last decade. The £30m figure occurs in most years of the last decade – it even drops to £20m for a couple of years. In reality the actual figures probably increased very gradually from about £26m in 2002-3 to about £36m in 2012-13, or at less than 4 per cent a year, not 33 per cent in one year!
It all goes to prove the old adage about “lies, damned lies and statistics”. You need to look critically at the sources of data, and at the notes the compilers provide, to help you understand what the real story is.
Ian Clark is a retired fundraising director and business consultant. Find him on Google+ .
