Donors who are higher-rate taxpayers are highly motivated by tax relief and would give much less under a composite rate system, participants in a round-table discussion on Gift Aid heard last night.
The discussion was hosted by the European Association for Philanthropy and Giving and consisted of about 70 charity accountants and fundraisers. They heard Kevin Russell, technical director of Stewardship, a Christian charity that donates money on behalf of 33,000 people, talk about a survey carried out among the charity’s donors.
He said that of about 170 donors who responded to the survey, 98 per cent claimed tax relief on their donations, 83 per cent said they were motivated to give by the fact that they received relief and 66 per cent said they would give less if a composite rate was introduced.
If there was a composite rate, all donations would receive a higher rate of relief, but donors who paid higher rates of income tax would no longer be able to claim any personal tax relief.
The survey respondents either gave more than £500 a year or had made substantial one-off gifts.
"We asked both major donors and those giving comparatively modest amounts to find out whether it would affect both groups," Russell said. "Both were strongly motivated by the tax reliefs."
But he said that Stewardship’s donors were mostly committed givers who thought hard about how to give most effectively, and were not necessarily typical of the average donor.
Helen Donoghue, director of the Charity Tax Group, said the sector would be unable to agree on any possible composite rate before the government deadline of September, when a forum of Treasury and third sector representatives will put forward proposals for Gift Aid reform.
"For the sector to come up with a composite rate is almost impossible," she said. "Charity umbrella groups debated this in detail in May, and the answer we arrived at was that we couldn’t agree.
"The position of the Charity Tax Group is that this will cause major problems for some charities.
"We think that simplification is the way forward. It may be that simplification of the administration around Gift Aid, including allowing more use of technology, will be enough to lock smaller charities into the system and allow us to provide much more support to organisations claiming Gift Aid."