Consultations on the Gift Aid system seem to have been around forever and suddenly, like the proverbial buses, a load of major changes have arrived at once. The Gift Aid Small Donations Scheme, online Gift Aid claims filing and the idea for a universal Gift Aid declaration to cover all modes of digital giving have come in close succession. All have welcome elements, but also have challenging rules and procedures of their own.
One reason for their complexity is the conflicting mood music that influences different aspects of their design. Streamlining and simplification have been dominant watchwords, but there is also increasing anxiety about tax fraud. This has led to contradictory impulses to both reduce and increase the red tape surrounding Gift Aid.
One result, for example, is the labyrinthine set of rules surrounding the GASDS, including the claiming ratios and a clunky two-track proposal for digital Gift Aid declarations by major and other donors. And although online claiming is generally presented as a simplification, it is basically part of the general HMRC move to online filing, itself part of the juggernaut driving online self-administered systems in all aspects of personal finance, bureaucracy and consumption.
Advantages of ease, speed, and efficiency are gained mainly by the suppliers, while users have to do more themselves and struggle with lengthy, poorly tested user manuals and lists of FAQs that come across as a polite way of saying "please don't bother us with your dumb questions about the system".
Gift Aid adds just over £1bn to charities' income from donations, but what is its real value once the cost of systems and transaction time are discounted? That just one-quarter of charities have so far registered for filing online claims is evidence of the challenge it presents. Are we at risk of Gift Aid income falling into the same black hole as in 2000, when covenants and net corporate giving were abolished almost overnight? It took four years for charities to convert their systems and their donors, and for the value of Gift Aid to get back to its pre-2000 level.
Charity Tax Group research indicates that almost two-fifths of charities might not register for online claiming by the end of September deadline, largely through lack of financial capacity, expertise or resources. If they do succeed, it will come at the cost of diverting resources from beneficiary and other services.
It seems once again that considerations of tax process rather than tax incentive are the main principles driving Gift Aid change. Donors do not expect charities to make sacrifices to benefit from Gift Aid, particularly in a time of austerity. The transition period for online registration should be extended and a universal digital Gift Aid declaration should be introduced only after a donor impact assessment.
Cathy Pharoah is professor of charity funding at Cass Business School