The not-for-profit sector can sometimes find HM Treasury, for want of a better phrase, a little uncharitable, although its aim to increase charitable giving by at least £700m a year through the Gift Aid system does put the department in a better light
But as the government staged its first Gift Aid consultation gathering on
Monday, it was clear that improving the current system does not require the ‘far
reaching and innovative ideas’ demanded by those running the event.
To begin with, Gift Aid is somewhat iniquitous in that higher rate taxpayers
are allowed to claim personal tax relief in a way that is simply not permitted
to standard rate payers. This makes a £100 donation cost around £76 for someone
in the 40% tax band, while the standard rate payer has to fund the full cost.
The answer here is simple. Include a tick box on the Gift Aid form that allows
high rate payers to donate the full 40% tax relief up front.
The tax break was intended to encourage the rich to give more, but the recent
headlines of huge philanthropic donations demonstrates that the rich are perhaps
not overly occupied with a small amount of tax relief.
This would also help quell the growing criticism of philanthropists that they
simply ‘purloin’ taxpayers funds and redirect it to the charity of their choice.
These same critics have even managed to conflate Gift Aid giving with tax
avoidance, an argument that was always way off the mark.
The Gift Aid system was set up openly by government and requires no fancy
footwork by tax advisers to use. All it needs is some refinement before it
becomes even better for charities and wholly satisfying for donors, whether they
be rich or on modest incomes.