Change Gift Aid rules, say umbrella groups

A ‘fixed rate' Gift Aid scheme is among the ideas being proposed by the Institute of Fundraising to protect charity revenues from the income tax cut announced in last week's budget.

The 2 pence cut in the standard rate of income tax from April 2008 means that charities will only be able to reclaim 25 pence on every pound donated instead of the current 28 pence.

Under the institute's suggested scheme, charities could choose to fix their Gift Aid rates at the current level in the same way that homebuyers can choose to fix their mortgage rates.

"At least you would know where you stand," said Megan Pacey, director of policy and campaigns at the institute. "You wouldn't suddenly find yourself half a million quid worse off."

She added: "There is a strong commitment from Government to work more with the third sector but to cut its financial contribution is like a slap in the face from a wet fish.

"The Institute has joined forces with Acevo and the Charity Finance Directors' Group to call on the Government to protect charities from the estimated £71m drop in Gift Aid income. The NSPCC estimates it will lose between £1m and £2m per year - although it will benefit from the Chancellor's promise to increase funding for ChildLine, now part of the NSPCC.

Another idea is to simplify the Gift Aid administration system and to make the penalties less harsh when mistakes occur, such as when declarations are lost or a donor turns out not to be a UK taxpayer.

"At the moment, if 10 per cent of your Gift Aid claims are mistakes, you have to refund 10 per cent to the Treasury," said Pacey. "But half the time people don't know if they are paying tax or not."

The Charity Finance Directors' Group suggested tolerating an error rate of 2 per cent before retrospective claims are made by the Treasury.

The group is also calling for a "root and branch review of charitable giving" as part of the current third sector review. It wants all income donated to charity to be Gift Aided unless expressly requested otherwise. It also wants an assumption that payroll giving will continue when people change jobs.

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