Everyone
needs a little encouragement now and then. When the revised
Gift Aid scheme was introduced on 1 April 2000, it was with
the aim of driving up charitable donations from the general
public.
Individuals can complete a short declaration stating that
they are subject to UK tax laws and any cash donations they
subsequently make are treated as if made after the deduction
of income tax. Charities can then reclaim the tax amount,
further adding to the initial donation.
Maximising income from the scheme will be even more important
next year when changes to the basic rate of income tax will
reduce the overall amount generated from Gift Aid by an estimated
£70 million. For example, the National Trust, which
currently receives £20 million in Gift Aid, estimates
that it will lose out on £2.5 million in 2008.
A range of Gift Aid accountancy software is currently available
to help charities deal with claims, such as Cleaford’s
GATS 3 Gift Aid processing service, WebTrust’s Gift
Aid Administrator, Orchard Software’s Gift Aid Manager
and Data Development’s Donations Coordinator to name
a few. All of these packages are primarily aimed at small
to medium-sized charities, as larger organisations tend to
have Gift Aid tools built into their standard accounting systems.
Blackbaud, one of the charity sector’s largest IT suppliers,
has launched its own Gift Aid service designed to enable charities
to capture, store, and manage the forms that are used to substantiate
donors’ Gift Aid declarations – reducing the risk
of them being lost or damaged and the hassle associated with
storage and retrieval.
“We typically find five per cent worth of missing Gift
Aid,” says Martin Jervis, managing director of Blackbaud
Europe. “Even in the best of systems, the average is
around
4.8 per cent.”
The Great Ormond Street Children’s Hospital implemented
Blackbaud’s Gift Aid programme in March this year. “We
wanted to manage our Gift Aid claims in a more easy and effective
manner; both in terms of recording Gift Aid circulation and
managing the actual documentation itself. We are also able
to make a claim in a much more timely way,” says Laura
Shobiye, head of business support at Great Ormond Street.
“At the moment it’s too early to tell whether
there’s been an improvement in Gift Aid revenue,”
she adds. “But we definitely have a much clearer picture
of the donations we can and can’t claim Gift Aid on.
And if we need to know at any point in time how many Gift
Aid donations we have, we can do that.”
Without a robust Gift Aid system in place, charities may be
liable to repayments should they undergo an HMRC audit and
fail to provide an accurate record of all the Gift Aid declarations
on which they have subsequently claimed tax. Aside from the
financial implications of a failed audit, there is also the
damage it can do to a charity’s reputation.
“If you don’t comply with HMRC regulations down
to the very minutiae, then they will punish you,” says
Barry Gower, managing director of GAIN, a Gift Aid recovery
and consulting service. “I’ve seen the Revenue
condemn a Gift Aid declaration form as not being acceptable
because when filing the form, the fundraiser had used a hole
punch which unfortunately had gone over the tickbox, so you
couldn’t be sure it had been properly marked.”
Current legislation allows charities to claim tax on Gift
Aid declarations going back six years. “People are currently
going through their seventh year-end since the legislation
began,” says Blackbaud’s Jervis, “so they’re
just getting to the stage where a whole year’s worth
of Gift Aid eligible donations are gone for good.”
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Effective
systems
Upgrading IT infrastructure is a costly process and not
something that all charities are in a position to do. As
John Tate, chairman of the Charity IT Resource Alliance
(Citra), says: “If you’re in that environment
and you don’t want to upgrade but you want Gift Aid
specific software, then that’s a situation where you
might look at a third party product.”
Many charities don’t require a full, conventional
fundraising database, but may occasionally need to claim
Gift Aid, in which case a specialist software package could
prove useful. Also, as Tate points out: “There’s
lots of fundraising software packages out there, but the
sophistication of the product and the competitive processing
are very variable. If you are processing large volumes of
donations then you want the very best product that’s
on the market.”
Oxfam already has a well-developed system in place for dealing
with Gift Aid claims. “We have a reasonably large
and robust system for recording our donations on and making
our Gift Aid claims from,” says Sioned Jones, head
of business support at the charity. “We keep a scanned
image of written declarations. We’ve got a database
with half a million records that have Gift Aid declarations
attached to them. You need to have an electronic system
to help you.”
GAIN’s Gower believes specialists are needed to help
charities deal with Gift Aid claims effectively. “You
would not produce your own set of accounts, fight your own
libel case, or re-wire your office,” he says. “Don’t
be arrogant – call in somebody who knows what they
are talking about. Don’t try and do it yourself unless
you are trained.”
His sentiments are echoed by Citra’sTate who says:
“If suddenly they [charities] kick off a fundraising
drive where Gift Aid can reclaimed, they might just find
that they’re not set up to deal with it and end up
with thousands of bits of paper to manually process.”
And charities will not be pleased to discover they have
overlooked a substantial Gift Aid sum. “You do get
that kind of catch-22 situation sometimes whereby you’ll
have somebody that says, ‘Oh great, you’ve found
all this Gift Aid that we can now claim – oh no that’s
dreadful, how do I tell people that I’ve failed to
claim it before?’ There are a lot of people wanting
to sweep stuff under the carpet,” says Jervis.
Blackbaud also offers smaller charities the chance to outsource
their Gift Aid processes to them completely. “Rather
than picking up the historic gift claims and validating
them, we can actually do claims on their behalf on an ongoing
basis, and we think there’s quite a lot of demand
for that,” Jervis.adds.
Of course claiming Gift Aid is not a statutory requirement
and, according to Gower, most fundraisers are not measured
or rewarded on their collection of it. “Because of
the draconian measures that are taken in the event of getting
it wrong,” says Gower, “you could say there
is even a disincentive, or no appetite almost, for Gift
Aid.”
And lack of knowledge about how Gift Aid works may be preventing
some charities from taking full advantage of the scheme.
“We’ve worked closely with other charities such
as Cancer Research to share best practice and we’re
trying to share this with other charities because it shouldn’t
be fearful,” says Oxfam’s Jones. “HMRC
aren’t trying to catch people out, they’re just
trying to make sure that you’re entitled to what you
claim and you uphold all the procedures.”
Unfortunately it is sometimes hard to tell who is actually
overseeing a charity’s Gift Aid processes. “It’s
difficult to find anybody who will own up to the responsibility,”
says Jervis, “so you typically find it is quite widely
dispersed throughout the organisation.”
For smaller charities finding it difficult to know where
to start when it comes to making a claim, Jones believes
Gift Aid accounting systems will undoubtedly help. “But
I think actually it’s still an area that many charities
don’t fully understand,” she says. “One
of the reasons we were looking at helping other charities
is that in 2006/07 there were only about 67,000 main charities
on the Charity Commission website that claim Gift Aid, so
you’ve still got another 100,000 or so who aren’t
claiming. There must be a reason why they are not because
they should be able to do so.”
It is also worth noting that, according to Jervis, it is
often only after, or at the point of, an HMRC audit that
charities come to them seeking help with their Gift Aid
systems. “Suddenly people realise that this might
be very, very serious,” he says.
With the results of the government’s Gift Aid consultation
process yet to be released, it is difficult to say with
any certainty how the scheme will develop over the next
few years.
However, it is clear that many charities are failing to
take full advantage of what can be a lucrative extra revenue
stream. Gift Aid may well encourage the general public to
donate more money, but it seems charities aren’t always
as good at collecting it.
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