Hot issue: Is Gift Aid a worthwhile source of income for small charities?

Some see Gift Aid as an effective way for small charities to increase income at no extra cost, while others say it is too costly and likely to alienate donors.

YES

Lindsay Boswell, chief executive, Institute of Fundraising

Gift Aid is a great opportunity for charities to increase their voluntary income. It maximises the value of donations at no extra cost to the donor.

A single Gift Aid declaration can cover any number of donations from a donor. It applies to donations received over the past six years and to future ones. In smaller charities, volunteers handle the administrative burden. This is where they have an advantage over larger charities: they don't divert significant resources to deal with Gift Aid.

The problem starts when charities that need to use paid staff to administer Gift Aid find that the administrative burden is a major barrier to the take-up of Gift Aid. The institute is looking into how Gift Aid can be simplified to reduce such barriers.

Research shows that 50 per cent of those who have engaged with the institute's tax-effective giving training programme and helpline have seen a rise in their incomes. It is worthwhile for small charities to get on board with Gift Aid.

NO

Andrew Jones, executive director of external affairs and policy, Charities Aid Foundation

Small charities' lack of tax reclaims through Gift Aid speaks for itself. For them, the benefits of reclaiming tax are outweighed by the cost of doing so. No doubt many of them lack the expertise required to understand exactly how to apply the rules on Gift Aid. It is possible that, rather than adding income to your cause, you actually owe money because of Gift Aid.

Donor relationships present another obstacle. For some people, confirming they're a UK taxpayer and providing you with their name and address is a request too far. And why would charities with limited resources want to complicate what can already be tricky fundraising messages with information about Gift Aid?

One thing Gift Aid can do is help to promote long-term relationships with supporters. But until charities understand the potential benefits, Gift Aid will continue to fail to provide them with a worthwhile source of income.

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