HM Revenue & Customs 'failed to collect data on Gift Aid and its effect on giving'

A report by the Public Accounts Committee says that, as a result, the evidence for increased charitable giving is at best inconclusive

HM Revenue & Customs
HM Revenue & Customs

HM Revenue & Customs has failed to collect data to evaluate whether Gift Aid and reliefs on donations are encouraging more people to give to charity, the Public Accounts Committee has concluded.

The report, Gift Aid and Other Tax Reliefs on Charitable Donations, published today, is based on evidence HMRC gave during a session of the committee in December after the National Audit Office report on Gift Aid was published.

It says that when reliefs were reformed in 2000, the Inland Revenue, HMRC’s predecessor, said it would monitor and evaluate the effects of the measures – but "HMRC has failed to plan for how to achieve this or to collect relevant data".

The report adds: "HMRC does not know if these reliefs have encouraged more people to give more to charity as was intended, and the evidence for increased charitable giving is at best inconclusive."

The report says that HMRC does not have enough information about the effect of changes to corporate Gift Aid in 2000 and that there is some evidence, from an evaluation in 2005, that it has reduced the income charities receive from donations by companies.

Since 2000, companies have been able to claim Gift Aid on donations, but under the scheme no tax is repayable to charities on gifts from corporates. Before that, charities had received repayments of tax on such donations.

"HMRC found evidence to suggest that following this change some companies were not increasing the amount they donated in response to this incentive, resulting in charities receiving less income from these donations," the report says.

The report recommends that HMRC should work with the charity sector to gather better evidence of the impact of the reliefs on donor behaviour.

The PAC report also says that HMRC has not adequately simplified the tax rules for reliefs on donations, despite this being an objective of the changes to Gift Aid in 2000.

It recommends that HMRC should look at ways in which the rules can be simplified to both reduce abuse and make the system easier and simpler for charities to claim the reliefs.

Margaret Hodge, chair of the Public Accounts Committee, said: "It is deeply concerning that HMRC does not know if Gift Aid reliefs have encouraged more people to give more to charity, because it does not have the data.

"In particular, HMRC does not have enough information about the effect of reforming corporate Gift Aid in 2000. It was designed to give an incentive to corporate donors to donate more to charity by providing tax benefits for the donors rather than for the charities.

"But HMRC does not know if this is happening or if, in practice, charities are receiving less income because companies have not increased the amount they are donating in response to this incentive."

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