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By Louise Richards, Director of Policy and Campaigns, Institute of Fundraising
Gift Aid provides an essential income stream for charities by increasing the value of donations through tax relief. It accounts for approximately 90% of all tax-effective giving and is the most cost-effective and democratic way in which the Government can show its support for the voluntary sector.
Figures produced by HM Revenue & Customs for 2008/09 suggest that, including Transitional Relief, almost £1 billion was generated through Gift Aid. But the Gift Aid system needs to work better so the maximum amount of money can get through to charities. This will be even more important in the future as public spending comes under pressure.
The Institute of Fundraising has launched a campaign calling for changes to Gift Aid for higher rate taxpayers. The Institute has presented the Government with detailed proposals that would allow higher rate taxpayers to donate the full amount of tax relief which they are eligible to reclaim back to charities.
Most higher rate taxpayers believe that they can currently reclaim the difference between the basic and higher rates of tax for themselves, but in practice the Government retains 40%. Even this can only be reclaimed by the minority of donors who complete a self-assessment form and who keep accurate records of all donations made, which means that very few people claim back higher rate tax relief on anything but the largest donations.
Allowing the charity to reclaim the full amount of tax paid by the donor is a straightforward way to allow a gift to be given fully tax-effectively, and has the potential to inspire more people to give and so substantially increase the amount of money charities receive through the Gift Aid mechanism.
If the Government changed its policy in line with the Institute’s proposals, this would mean in practice that a donation of £1000 would attract a full £666 in Gift Aid, and so be worth £1,666 to the charity.
The Institute is calling on people to support its campaign by lobbying their own MPs and political contacts for these reforms, and to sign a petition on the Downing Street website calling upon the Prime Minister to implement them – find it at http://tinyurl.com/12vzz5. The petition has already gained over 1000 signatures in a short time, and there is clearly a groundswell of support.
To find out more about the Institute’s Gift Aid campaign, contact Louise Richards, Director of Policy and Campaigns, or visit the Institute’s website at www.institute-of-fundraising.org.uk