TaxCorporate TaxPAC: No ‘proper’ Gift Aid evaluation since 2000

PAC: No 'proper' Gift Aid evaluation since 2000

Public Accounts Committee critical of HMRC's data on Gift Aid's success

THERE HAS BEEN “no proper evaluation” of Gift Aid’s effectiveness or value for money to the charitable sector since its introduction in 2000, the Public Accounts Committee has claimed.

Yesterday afternoon’s particularly fractious hearing with HMRC officials was held following a National Audit Office report that found neither the Treasury nor HM Revenue & Customs know whether Gift Aid and other tax reliefs on donations have resulted in more income for charities.

According to the report, the reliefs cost the taxpayer around £940m in 2012/13 while it is impossible to conclude that reliefs on donations in their current form provide value for money.

Committee chair Margaret Hodge branded the findings “unacceptable” and claimed that “despite the purpose [of Gift Aid], charitable giving has not increased”.

While HMRC chief executive Lin Homer (pictured) and director David Richardson accepted they “can’t conclusively demonstrate cause and effect” between the provision of Gift Aid and the presence of donations that previously were not being made, they rejected “the assertion that donations have not moved, and neither does the charitable sector”.

“What we don’t know is whether donations that weren’t being made without tax relief are now being made with tax relief,” said Richardson.

Homer added there had been a demonstrable significant shift from deed of covenant (a tax-beneficial incentive regime) to Gift Aid.

There have been issues, too, with tax avoidance schemes exploiting Gift Aid, with one case emerging in January of a registered charity – The Cup Trust – raising around £176m over two years from 2010 – more than the Royal Society for the Protection of Birds, the British Heart Foundation and the Salvation Army – yet only £55,000 was put towards its stated cause of “improving the lives of young children and adults”.

Instead, the tax scheme carried out transactions that artificially generated Gift Aid for donors, allowing them to drive down their tax bills. For example, someone donating £1m to the Cup Trust could expect to recoup most of their money and still be entitled to between £250,000 and £375,000.

Currently there are around 1,800 people in eight marketed Gift Aid-based avoidance schemes, claiming about £240m.

HMRC maintains none of those schemes work and will not be paying out, although some are being fought in the tribunals, which will go on into the new year.

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