All adults should have an annual Gift Aid allowance up to which all donations would be treated as eligible for the tax break, a report by the research company nfpSynergy suggests.
In a report released today called How Could Gift Aid be Improved and Generate More Income for Charities?, nfpSynergy proposes reforming Gift Aid to allow every adult over the age of 16 to receive an annual amount of money – for example, £500 – for which all donations are treated as tax-effective.
The report says this allowance could apply even if a person did not pay the right income tax under the exissting system, and claims the idea is similar to the current arrangement for pensions, where pension contributions are attached to tax relief even for those who do not pay tax.
It says: "Imagine how giving would be encouraged if every adult could do so knowing that Gift Aid would automatically be on their donations, and imagine how much simpler Gift Aid bureaucracy would be if all donations could be assumed to be Gift Aid-compliant."
The report also suggests that the devolution of income tax to the Scottish government could enable Scotland to "create a Gift Aid scheme fit for the 21st century".
It says this can be done through four amendments to Gift Aid: allowing Gift Aid declarations to be made with mobile phones or email addresses as the unique identifiers; reclaiming invalid Gift Aid claims from charities rather than donors; including National Insurance as an eligible tax for Gift Aid; and removing restrictions on the Gift Aid Small Donations Scheme.
The report says: "Without the shibboleths of Westminster and HM Revenue & Customs bureaucracy, the Scottish government could create a scheme that would reduce the cost of Gift Aid for both charities and HMRC, and also increase take-up."
The report also looks at 11 problems with the existing Gift Aid system, including increasing the impact of tax thresholds on Gift Aid eligibility and the bureaucracy involved in complying.
The proposals follow a number of recent government reforms to the Gift Aid system, including adjustments to the GASDS and HMRC proposals to simplify the process of securing Gift Aid declarations from donors using online giving platforms.