News story

Radical reform of Gift Aid in response to changing giving habits

Government to overhaul Gift Aid to make it easier for charities to claim tax relief on spontaneous digital donations.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Charity box

The government has outlined proposals for one of the biggest reforms of Gift Aid rules in recent years. These reforms will make it easier for charities to claim tax relief on donations made online or by text message, ensuring that more money goes to good causes.

Gift Aid is one of the best-known tax reliefs available to charities, allowing them to reclaim tax on any donation paid by an eligible donor. Last year over £1 billion was paid to charities through Gift Aid.

The government wants charities to be able to claim Gift Aid on as many eligible donations as possible, and has already made a number of changes to the rules that represent a radical package designed to make claiming easier. For example introducing a new IT system that allows charities to claim Gift Aid online, and simplifying rules for charity shops who claim Gift Aid on donations from the sale of goods.

This government has also introduced the Gift Aid Small Donations Scheme to enable charities to claim Gift Aid style payments on donations given via collecting tins and buckets. This will be worth over £100 million a year to charities when the scheme gets up and running.

But further reform is necessary to modernise the system. The way people give is changing, and new technology is allowing people to make donations in ways that could not have been imagined ten years ago.

Sajid Javid, Economic Secretary to the Treasury, said:

Britain is a generous country and the amount of giving is something we should be deeply proud of, especially in these challenging times. The government has already introduced radical changes to to encourage donations, but we can do more. I am determined to build a Gift Aid system fit for the 21st century so that more money goes to charitable causes. Quite simply, I want to see Gift Aid claimed on as many donations as possible. I look forward to hearing ideas from the charitable sector so that we can look towards the future of Gift Aid.

The consultation explains that, because Gift Aid is a tax relief, it will always involve a certain amount of information passing between the donor, the charity and HMRC, through what is known as the Gift Aid declaration.

The government is suggesting ways in which this process can be adapted for spontaneous digital giving, for example by shortening the declaration, or by allowing the organisations that process digital donations to collect and pass on the Gift Aid or the declarations to charities.

The consultation document also asks for views on other significant changes that could be made to Gift Aid, for example the introduction of a universal Gift Aid declaration database that would mean that donors could complete a single declaration to cover all their donations to charity.

The aim of the reform is to increase take-up of Gift Aid on digital donations so that more money ultimately goes to good causes. The government is asking charities, organisations that process digital donations and donors for their views on the proposed changes to the system between now and 20 September 2013.

Photo by Mindfulone on Flickr. Used under Creative Commons.

Published 3 July 2013