Gift Aid

In the year ending March 2010, charities received a total of around £1 billion from HMRC as the tax claimed on £3.5 billion of donations. Many charities claiming Gift Aid, and philanthropy advisers, agree there is room for improvement in the administration of the relief. Peter Fanning, head of the Chartered Institute of Taxation, submitted a report to HMRC in October last year making several specific recommendations and Justine Greening, Economic Secretary to the Treasury, responded to the main points before Christmas.

The main recommendations and the Treasury's response are set out below:

  • The sector wants to use new technology to increase the use of Gift Aid and, in particular, to allow online Gift Aid declarations. The Treasury will consider whether this offers value for money but predict it will take 18 months to review. In the meantime, new 'intelligent forms' will be introduced this year to help charities avoid common mistakes.
  • There is strong support for a Gift Aid database which all charities could download and use to record the details included on a Gift Aid declaration, which would satisfy HMRC's evidence requirements. While the government has offered to work with the sector on developing such a database, they will not fund it.
  • All agree that Gift Aid needs to be publicised more - both to donors and charities - and also encourage tax professionals to donate skills and time to help charities. It will be interesting to see what plans materialise in this area.
  • Finally, the government is not planning to extend the transitional relief, which saved charities £105 million this year. This means a drop from 28.1p in the pound to 25p in the Gift Aid that can be reclaimed from 6 April 2011.
  • The Gift Aid Forum has now met for the last time and a new Charity Tax Forum will commence its work this year with a wider membership to review a wider range of taxation issues.

Increasing giving in the UK

The Coalition's philanthropy strategy was launched in early December ( read more) and the Giving Green Paper was published at the end of December. The Green Paper does not give any further concrete indication of changes to the taxation of donations (including lifetime legacies), but states that the Government will review the relationship between financial incentives and giving. For a full copy of the Green Paper click here. The public consultation on the Giving Green Paper is open until 9 March 2011.

An independent philanthropy review will feed into the government's review with proposals for encouraging giving. Thomas Hughes-Hallett of Marie Curie Cancer Care is heading up the review and hopes to identify actions which will allow the quality and quantity of giving to flourish giving in the UK.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.