The Gift Aid donor benefits scheme should be simplified and charities should have to inform donors about the amount of Gift Aid claimed on their donations only if requested to do so, according to a consultation response from a group of major charity bodies.
Gift Aid rules allow charities, within certain limits, to give benefits to donors – such as memorabilia or invitations to social events – as a way of saying thank you.
The general rules are: for donations of up to £100, the value of the benefit can equal 25 per cent of the donation; for those between £100 and £1,000, the value of the benefit is capped at £25; and for donations of more than £1,000, the value of the benefit can be worth 5 per cent of the donation, up to a maximum of £2,500.
A Treasury consultation on simplifying the system, which closed yesterday, proposed two possible reforms to the general rules, known as the relevant value test, one of which was its complete removal.
The second proposal was to retain relevant value test thresholds but reduce their number from three to one.
The threshold would be a percentage of a donation up to a prescribed maximum aggregate benefit value: for example, a 10 per cent threshold on all benefits up to an annual value of £2,500 would mean Gift Aid could be claimed on an entire £1,000 donation providing the benefits given did not exceed £100.
In a joint response to the consultation, the Charity Finance Group, the National Council for Voluntary Organisations, the Institute of Fundraising and the Small Charities Coalition called for a simpler system, urging the government "to make the most of this chance to reform the rules and put in place a simpler and more effective regime".
The response says: "It should be the aspiration of this review that we have both a system which protects Gift Aid from being abused and reduces the amount of ‘red tape’ which charities need to comply with in order to make Gift Aid claims on donations."
Among the proposals put forward by the four representative bodies is a recommendation that charities need inform donors about the amount of Gift Aid claimed on their donations only on request, rather than a mandatory reporting system being introduced, and that the valuation process be altered to reflect the cost to the charity rather than the value to the donor.
The response also supports reducing the number of thresholds from three to two, introducing a disregard for low-value benefits to help small charities and for a widening of the scope of the donor benefits scheme to include other benefits, such as apps, toolkits and other materials used to help charities advance their charitable objectives.
The consultation response says the government should also make a full impact assessment to ensure the rules do not disadvantage certain types of organisation.