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
For years the Institute of Fundraising and major charities have been trying to get the cost down of making donations via TXT on your mobile. One of the last major hurdles is VAT, as the mobile phone companies say they can’t distinguish between the various premium-rate lines they operate.
The HMRC (Her Majesty’s Revenue & Customs) stated 2 years ago that VAT was not chargeable on text donations, but the phone companies are charging charities an estimated £1m a year in VAT. Neither are they then returning the money in the form of a corporate donation.
However, at last the HMRC and the telephone companies have met and begun discussions on how to get round this problem. It would appear that all the phone networks are in favour of the no VAT charge, but they claim it is a very complex business and there will be no quick fixes to it.
We will have to wait and see if the phone companies follow through their words with real actions, in the meantime, try and choose a more cost effective way to donate to your favourite charities, preferably one that lets you Gift Aid your donation as well. That way, your £1 is worth £1.28 to the charity, which is better than losing 17p in unnecessary VAT!
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.
