Gift Aid

Let’s talk about… Gift Aid

The National Audit Office believes that as much as £2.3 billion of Gift Aid is going unclaimed. Jo Barnett, Executive Director of Virgin Money Giving, talks to Andrew O’Brien, Head of Policy and Engagement at the Charity Finance Group, about what can be done to ensure charities don’t continue to miss out.

“If you are looking at it from a utilitarian perspective of doing the most good and having the biggest possible impact – the UK’s Gift Aid system is the best in the world,” says Andrew O’Brien, Head of Policy and Engagement at the Charity Finance Group. “There’s no other scheme in the world where the government passes your tax onto the charity.” But as both Andrew and I have discovered, it is not without its complications. Since Virgin Money Giving launched, we have collected and paid £78 million to charities in Gift Aid. It’s a service we’ve never charged for and we’re very proud of – but it has not always been easy.

The paper trail

When we launched Virgin Money Giving we had to send HMRC an individual piece of paper for every single Gift Aid claim. So if we had 17,000 people tick the Gift Aid box, we had to literally print out 17,000 sheets of paper. We had to deliver it on pallets to their offices. Thankfully, things have moved on – it’s now an online process, but it’s still not perfect. The National Audit Office believes that £2.3 billion of Gift Aid was not claimed for in 2014-15.

“One of the biggest barriers to uptake is that people simply don’t understand what Gift Aid is and if they don’t understand it they won’t do it,” says Andrew. “We need to think about how we educate those that work and volunteer in the sector. We have 850,000 people working for charities in the UK and millions more volunteering, and every one of those people could be turned into Gift Aid champions, helping charities not lose out as well as helping the public’s understanding. The impact of that £2.3 billion could be transformational for the sector”.

We here at Virgin Money Giving will certainly do what we can to help and O’Brien has noticed the impact. “Not all sites offer to take on the admin work of Gift Aid, but Virgin Money Giving does and it really makes the difference,” he says. “By taking away all the pain for the charities, they make the online fundraising process much more efficient.”

The common good

Both Andrew and I believe that changing the public’s opinion of Gift Aid is a huge task. He tells me about a focus group on Gift Aid he attended run by HMRC. “It was quite scary what people thought Gift Aid was,” Andrew recalls. “One person thought it was a tax on charities. Someone else thought it was just about overseas aid, so if you tick that box money was going to help abroad, like Live Aid. The name Gift Aid doesn’t really tell you what it is.”

In my experience all that most people know about Gift Aid is that classic line: “If you’re a UK taxpayer, would you like to claim Gift Aid?” But you have to have paid at least as much in income tax or capital gains tax in that tax year as the charity wants to claim in Gift Aid, which means that Gift Aid has always been opt-in rather than opt-out.

Another complication is that a fundraiser also cannot claim Gift Aid on money they’ve collected from other people, or from businesses. The tick in the box has to come from the person who’s giving the money.

The road ahead

The real challenge for people in the third sector is making sure that Gift Aid keeps up with technology, and here there is cause for some optimism. New legislation is allowing intermediaries like Virgin Money Giving to play a greater role in the administration of Gift Aid. A donor can now give permission to an intermediary to create a “lasting Gift Aid Declaration” (GAD), to be stored and used for all further donations within that tax year. Donors who take up the service would not be asked the Gift Aid eligibility questions on subsequent donations and the intermediary would be responsible for re-soliciting the GAD each tax year. So individual charities collecting with tap-and-go collection boxes or over text wouldn’t need to ask the donor to complete Gift Aid declarations every time, which would make it easier to claim on donations. It will also simplify the process for donors that give to more than one charity.

The theory is great, but this technology is expensive. There’s no real impetus on the government to invest in development, since at the end of the day they keep any unclaimed Gift Aid money.

So what do you think? Is Gift Aid important to your charity? Do you feel like you are missing out? And what more can be done to ensure we all continue to make a difference? Please get in touch either in the comments section below or send us an email.