Charities lose £808m by 'neglecting tax breaks'

Charities missed out on more than £808m last year by failing to collect donations tax-efficiently - an increase of £117m on the previous year, according to a new report.

Financial advice website Unbiased.co.uk's Take TaxAction report found that UK adults gave a total of £8.2 bn to charities in 2005/06.

But researchers calculated that this amount could have been bolstered by an extra 10 per cent if charities and donors had been more tax-savvy.

The report is part of a wider campaign by the site to calculate total tax wastage every year.

Researcher Paul Hersey, who led the study, said that government should offer more incentives to help companies promote payroll giving because it has made it easier to collect Gift Aid.

"People and companies are still not picking up on schemes such as payroll giving because they require effort," he said. "Payroll giving is an administrative burden, particularly for small and medium-sized companies."

Lee Grant, project manager for tax efficiency at the Institute of Fundraising, said that Unbiased's estimate of £808m differed from the £700m the Charities Aid Foundation believes charities lost out on in the same year, but both figures demonstrated that charities were failing to address the problem of tax efficiency.

"We believe that up to a third of donations cannot be collected tax-efficiently, perhaps because they are given by non-taxpayers or form part of a cash collection," he said.

"An achievable target for charities would be to collect two-thirds of donations tax-efficiently. Only a handful of the big charities are achieving this and, on average, charities collect only a third of donations tax-efficiently."

The Unbiased.co.uk study pulled together figures from a range of sources, including Inland Revenue records, the Department for Work and Pensions' annual family expenditure survey and the Charities Aid Foundation.

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