Reviewing gift aid and charitable giving

Charity Box-Large December 2010

The Centre for Charitable Giving and Philanthropy has contributed to research exploring proposals for reforming and simplifying tax-effective Gift Aid donations to UK charities.

Gift Aid – the system which enables people to make tax-effective donations to UK charities - is a hugely important source of income for charities with over £1bn of tax on personal gifts reclaimed from 2009/2010, but charities argued that the system was too complex and needed reforming. The Government sponsored research into the Gift Aid Forum in 2009 and involved 20 organisations, including the Centre for Charitable Giving and Philanthropy (CGAP).

The Forum, which ran from January to November 2010, explored proposals for reforming and simplifying Gift Aid. CGAP's Professor Cathy Pharoah and her colleague Tom McKenzie, who are based at City University London, contributed to the Gift Aid review.

Radical changes to the scheme had initially been proposed which would have resulted in changes to the value of charitable tax-breaks for the highest value donors. These changes may have benefited lower-value donors who fail to claim charitable tax breaks on their gifts, and the charities they support, but researchers concluded that the overall advantage to the charity sector was unclear.

CGAP believes it is important to explore and evaluate the impact of various different approaches to encouraging philanthropy within the current climate. It advised that changes to taxation on charitable giving should only be introduced where there is clear evidence of their likely benefit in increasing the overall value of philanthropic giving.

Instead of recommending a radical change to the structure of personal income tax-breaks on giving at this stage, the Treasury instead placed emphasis on increasing donor access to and uptake of the scheme as well as streamlining its operation to improve cost-efficiency for charities.

Impact

  • The Treasury confirmed it would implement many of the proposals in the Gift Aid Forum report.
  • Evidence and commentaries were provided by CGAP during the consultation process, including evidence on the 'cost' of charitable giving.
  • CGAP was invited to join a new forum set up by Treasury/HMRC in January 2010 to determine the future of Gift Aid.
  • The Treasury announced a new policy including improved guidance on oral declarations and possibility of online filing of Gift Aid claims.

Further information