The declaration is needed as Gift Aid is a tax relief (rather than public expenditure) and HMRC need to be able to ensure that Gift Aid claimed on specific donations can be linked back to the donor’s tax affairs. However, the length of the statement, requirement to collect and reference to no less than four different forms of taxation (income tax, capital gains tax, council tax and VAT!) make it complex to use and potentially off-putting for donors. Furthermore, charities need to collect a raft of information from donors.
In a time of growing digital donations, particularly by mobile phone, the declaration can be difficult to read and fit on a small screen. Basically it’s wordy and cumbersome; for anyone not familiar with it, HMRC’s model statement reads as follows:
"I confirm I have paid or will pay an amount of Income Tax and/or Capital Gains Tax for the current tax year (6 April to 5 April) that is at least equal to the amount of tax that all the charities and Community Amateur Sports Clubs (CASCs) that I donate to will reclaim on my gifts for the current tax year. I understand that other taxes such as VAT and Council Tax do not qualify. I understand the charity will reclaim 25p of tax on every £1 that I have given."
Did you get all that on the first read? I’ll be surprised if you did, and therein lies its problem. It’s supposed to provide you, as the donor, with all the information you need to feel confident that your gift aid claim will be valid. Technically it does, but the reference to taxes and the legal tone doesn’t exactly invite you to provide your details and tick the box.
The current consultation on ‘Gift Aid and Digital Giving’ includes proposals to shorten the declaration to make it more accessible. In doing so, HMRC propose moving the liability to make up any shortfall to the charity rather than the donor on donations below a threshold, likely to be between £1000- £5000. The reason being that the slimmed down text will no longer explain to the donor that they must have paid enough tax to cover the donation, so they might not fully understand the consequences of authorising the collection of Gift Aid. At present HMRC apparently reclaim close to £1m of the relief each year due to donors not having paid enough tax.
This move to make the declaration more readable reflects concerns raised by the sector over the years, and HMRC’s efforts to address these is a welcome move. However, there are still issues with the proposals that will need to be ironed out.
- Firstly, while larger charities may be in a position where they canto pick up the tab for their donors, the impact of any repayments is likely to be bigger for smaller charities and so they may be less willing to do so.
- Secondly, finding the right form of concise wording may continue to pose a challenge. For example, any reference to HMRC approaching the charity if the donor has not paid enough tax (as is mooted in the consultation document), may be equally as offputting for the donor.
- Finally, creating a two tier system with a threshold, over which the old GA declaration wording must be used, may complicate things for charities and bring with it implementation costs. On this point, I think the preference would be for a single, universal, short and simple statement – although of course this could raise some difficult questions about where liability lies for any shortfall on large donations.
So, in brief, the good news: the declaration may get shorter and be easier for charities and in particular fundraisers to use. The bad news: getting there is not going to be straightforward and will take time. As any changes will require changes to secondary legislation, it’s likely to be at least 2015 before there are any changes in practice.
CFG will be responding to the consultation on the Digital Giving which closes on the 20th September. To contribute to the consultation, contact firstname.lastname@example.org
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