Following the Government’s decision to allow charities to continue benefiting from Gift Aid at the pre-tax cut rate of 22p in the £1, the Institute of Fundraising, after consultation with the HMRC, has come up with the following text to go on all Gift Aid declarations:
“If you Gift-Aid your donation, ‘x charity’ will continue to receive an additional 28p. ‘X charity’ can claim Gift Aid tax relief of 25p on every pound you give. HM Revenue & Customs will also be operating transitional provisions for Gift Aid donations made from 6 April 2008 until 5 April 2011, paying a Government supplement of 3p on every pound you give.”
For any charities that had already reprinted their Gift Aid and other donation literature to take into account the new reduction in income tax rate, the HMRC have said it will be OK to continue using these, until existing supplies need to be replaced. There is no requirement to either shred or reprint any materials, which would only be a wasted cost to those charities.
It is important that all charities, no matter how large or small, should continue to make best use of this opportunity to continue to promote the use of Gift Aid and try to increase the % of donors taking advantage of if. In this way, they will lessen the impact of the reduction in income when the 3 year special provision comes to an end.
For more information about Gift Aid and how to make the most of it, check out the Institute of Fundraising’s special briefings at: www.tax-effective-giving.org.uk/downloads.html
One last thought (for the time being) about the recent Budget decisions on Gift Aid, that seems to get quietly ignored each year, is the failure of the Government to do anything about Corporate Gift Aid. In the past, (pre-2000), when companies gave donations to charities, the charity could claim back the tax on that gift, just as they did with individuals who made Deeds of Covenants with the charity.
All that changed with the introduction of Gift Aid in 2000. The Government scrapped the tax on company donations going to charities and instead allowed the companies to claim it back for themselves. The rationale, it appears, was that the companies would give higher donations, that after they claimed back the tax would mean it cost them less. For example, if they gave £128, they could claim back the tax, which would have been £28, so the charity got £128 and the company only forked out £100. Fine, if companies and individuals thought that way. Reality: they don’t!
So when asked why they hadn’t changed anything about corporate donations and Gift Aid, following last year’s Gift Aid consultation, it would appear the Treasury officials will only respond by saying, “It remains under review”. It’s easy to keep quiet about something you, the Government, introduced that went totally pear-shaped, isn’t it Mr Darling?
Following on from my previous blog about the reduction in Gift Aid from 28p to 25p for every £1 donated, the Chancellor, Alistair Darling (don’t you love that name?) made a surprise move in his recent Budget. The rate of Gift Aid, which was based on income tax at a rate of 22p in the £1, is not going to change for charities for the next three financial years, as a way to lessen the blow to income when the tax rate falls to 20p in the £1.
He also announced some tweaking of the system to make it easier for charities to collect and claim their Gift Aid. However, he failed to go along with the majority opinion, which was to change radically the way that Gift Aid is calculated, from the current system based on individuals having to declare they want the charities to claim the Gift Aid, to a system where it is given by the HMRC based on the proportion of a charity’s donors who are tax payers. This would have greatly reduced the time and money it costs charities to administrate Gift Aid. Still, I suppose we mustn’t grumble!
The thing that has really annoyed so many charities, is that there was no warning that he was going to keep Gift Aid at the same level for another 3 years. As a result, hundreds of charities have been getting all their donation literature re-printed, at considerable cost to some organisations, in line with the lower Gift Aid rate we were due to move to. Now they have piles of unusable literature, because the facts and figures are incorrect.
Sometimes a surprise can backfire and in this case I doubt the Chancellor will be offering to compensate the waste of time and materials his unexpected announcement has caused.
As we begin to get close to April 6th, many people will be looking forward to the reduction in income tax from 22p in the £1 to 20p in the £1. It will mean a bit of extra cash in the pocket or bank (although with cost of living rising daily, like the gas and other fuel bills for starters) many of us will hardly notice the change.
However, just bear a thought for all the charities that rely on Gift Aid to increase the value of your much appreciated gifts to them. Whenever the tax rate changes, so does the amount of Gift Aid. Since 2001 the tax rate has been consistent, enabling charities to increase the value of gifts by a whopping 28.2p for every £1 given. But not for much longer. The reduction of tax to 20p in the £1 means that in real terms, UK charities will lose out by about an estimated £75 million in this next financial year alone!
When you then take into account that they are also facing the huge hikes in fuel bills that householders are, many will find it harder to meet their financial needs. Running much-needed charitable services, be it a hospice, a centre for the disabled, a counselling service or any of the many others, it will be harder to do with costs going up and income coming down.
So when you get your April wage slip and you notice that there’s a bit more than last month, why not decide to share some of your good fortune with a cause close to your heart and increase the annual amount you give them, whether through regular monthly payments, or as a one-off gift? When you look around, despite the ridiculous cost of things today, the majority of us are actually very comfortable, compared to others, who are - literally - struggling to survive, day to day. Most of us could easily live with less, in order that others more needy might have a little bit more.
