The government has today launched a consultation on proposals to reform Payroll Giving.
24 January 2013
The government has today launched a consultation on proposals to reform Payroll Giving. In 2011/12, £118m was given to good causes by 735,000 people through Payroll Giving, but the government believes that there is scope to increase this by simplifying the scheme’s administration and making it easier for donors to give.
Payroll Giving allows UK income taxpayers to give regularly and on a tax-free basis to the charities and good causes of their choice. Donations are deducted from gross pay, so each £1 given will only cost a basic rate taxpayer 80p. At present, only 2% of employers offer Payroll Giving schemes, with just 3% of employees donating.
Employees are normally recruited to schemes by professional fundraising organisations that visit businesses, and transactions are handled by specialist Payroll Giving Agencies (PGAs). Under the current rules, all PGAs must be charities.
The government’s proposals include:
- introducing the provision of exit packs when an employee stops giving to the scheme, which includes materials to help them maintain a relationship with their chosen charity.
- bringing in standardised forms to make sign-up for donors simpler.
- reducing the processing time from 60 to 30 days to make sure charities get their donation faster.
- opening up the PGA market to competition from non-charities to allow new entrants to invest in and improve the system.
- ensuring that PGAs are transparent to donors on the cost of processing their donation.
Together, these measures will make it easier for donors to start Payroll Giving, will mean charities receive donations more quickly and will make it easier for people to keep donating when they move job. Increased competition among PGAs should also help drive down processing fees and raise standards.
The Economic Secretary to the Treasury, Sajid Javid MP, said:
Charities do vital work in our communities, and this government is committed to helping them achieve more. Payroll Giving is a powerful and flexible way for people to support the causes they care about. The scheme has real untapped potential, not just for raising money for charity directly, but also for starting a giving culture among those that do not normally donate.
The proposals that the government is publishing today are an important step in raising awareness and making this scheme work better for donors and charities alike. I look forward with interest to hearing the comments and ideas returned.
The Minister for Civil Society, Nick Hurd MP, said:
We want to explore ways that make giving to good causes easier and help build better connections between business and charities.
Payroll giving is an underdeveloped opportunity. This consultation is focused on how we can make it work much better for donors, employers and charities.
Notes for editors
The full document can be found here.
The period of consultation will run from 24 January 2013 to 19 April 2013.
An employer or pension scheme contracts with a PGA to operate a Payroll Giving Scheme on its behalf. Once an employee or pension scheme member has signed up, the employer deducts the donation from the employee or pension scheme member’s gross salary. They then submit it to the PGA, which makes checks before passing it on to a charity of the employee’s choice. The payments are subject to a small administrative charge agreed under the contract between the PGA and the employer or pension scheme administrator.
HMRC approves and regulates PGAs. The contract between the PGA and employer or pension scheme administrator must be approved by HMRC.
There are currently 12 active PGAs in the UK.