Don Bawtree: New research on Gift Aid

Also: a better method of annual reporting; and new guidance from the OSCR

Don Bawtree
Don Bawtree

HM Revenue & Customs has released some really useful research on Gift Aid. It provides food for thought not just for the tax man, but for all charities looking to increase Gift Aid take-up or to manage the risk of incorrect claims. Some of the key findings include that the vast majority of people aged 16 years or over have given to charity in the past 12 months.

It also shows that Gift Aid was added to more than half (52 per cent) of the total value of donations and that, overall, 8 per cent of donations had Gift Aid incorrectly added to them by ineligible donors.

On the other hand, 25 per cent of donations did not have Gift Aid added to them where the donor was eligible, leaving up to £560m in unclaimed Gift Aid and representing potential missed income for charities. There might be an offsetting effect caused by the small donations scheme.

The research says that ineligible claims are mainly caused by a lack of understanding of Gift Aid and what it means to be a taxpayer. There is little evidence to suggest that ineligible donors wilfully and incorrectly add Gift Aid to their donations. More than half of donors have a "good" or "fairly good" understanding of Gift Aid.

The research also shows that the value of unclaimed Gift Aid is mostly driven by a lack of opportunity and, to a lesser degree, by misunderstanding of Gift Aid. And proportionally, online channels are more likely to contribute more to the Gift Aid tax gap, while offline channels contribute more to unclaimed Gift Aid.

The report concludes with two key challenges that charities should tackle in their approach to Gift Aid-related fundraising: misunderstanding of Gift Aid and what it means to be a taxpayer, or how to qualify as someone eligible to add Gift Aid; and a lack of consistent opportunity to add Gift Aid to donations.

The Financial Reporting Council has cited Generali, under its "clear and concise" initiative, as a company that has successfully reduced the volume of its reporting. The focus here was on quarterly reports, rather than annual reports. Since early 2014, interim reporting for listed companies in Europe is no longer mandatory. However, though not required, it still remains common practice for many. Charities are obviously required to produce only an annual report, but Generali’s example is interesting, first as a way in which charities might approach their annual reports and, secondly, as a way for larger charities to consider issuing more regular information. In Generali’s case, it reduced 200 pages to just four.

Key lessons from the process include: talking to stakeholders and regulators; mocking up different versions to test them; focusing on strategic key performance indicators and significant events; using other channels to support the message; and allowing time – this process took five years to complete.

It is interesting to note what the company cites as the advantages of producing a shorter and more frequent report. Apart from the time saved by not producing anything longer, it says this allows it to focus on its own messages and can reduce risk around the annual report.

Office of the Scottish Charity Regulator
The Scottish charities regulator the OSCR has published new guidance on two key topics that affect charity finance: trading and fundraising.

The trading guidance covers types of charity trading, trustee duties and trading subsidiaries. Because tax operates on a common basis across the UK in this respect, trustees of charities in other parts of the UK might find this guidance useful too, complementing the Charity Commission’s slightly older, and much longer, equivalent – CC35.

The OSCR has also published guidance that sets out the rules a charity must follow when carrying out its fundraising activities. It covers Scotland’s system of fundraising self-regulation and the OSCR’s role, charity trustee duties, fundraising with third-party organisations, and public collections and exempt promoters.

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