How do you solve a problem like the Gift Aid Small Donations Scheme?

Rogers & Hammerstein would probably have avoided making the Gift Aid Small Donations Scheme (GASDS) the subject of one their catchy-show tunes, but at NCVO improving the GASDS is one of our highest priorities (see our manifesto)!

The GASDS enables charities to claim a ‘top-up payment’ on claim small cash donations (under £20) up to £5000. This means that small charities that do small cash fundraising are not disadvantaged compared with other forms of fundraising and hopefully will encourage smaller organisations to fundraise and diversify their income.

Alongside our partners at Charity Finance Group and the Institute of Fundraising, we have been consulting with charities to understand what barriers to using the scheme might be, as the GASDS has only distributed £6m in its first year, when it was predicted to cost £50m.

Over the summer, we launched a survey to ask charities about the scheme and received over 200 responses. On the basis of this, we have created a briefing on the Gift Aid Small Donations Scheme (PDF, 470KB) on the scheme and outlined a number of reforms that the government should make in order to improve uptake.

Here is a quick summary of its findings

1. Communication, Communication, Communication…

Most charities, particularly small organisations, do not check HMRC’s website for new schemes on a regular basis and unsurprisingly, nearly half (46%) of micro charities (income less than £10k) and more than one in five small charities (£10-100k) reported that they did not know about the scheme.

If GASDS is really going to take off, the government needs to consider better ways to promote the scheme whether that is through face-to-face engagement with charities or through using existing networks to distribute easy to understand information about the GASDS and how it can help.

2. “The claiming process is too complicated! Much clearer guidance needed please!”

The above is a quote from one of our survey respondents, but speaks for many charities. Charities of all sizes reported difficulty in understanding the claiming process – with one in five respondents stating that the claiming process had put them off claiming. 66% of micro (income less than £10k) and small charities also reported difficulty in understanding what types of donations they could claim under the scheme, another barrier to take up.

Related to the issue of communication are the complex rules of the scheme; particularly regulations around donations made in ‘community buildings’, the ‘matching requirement’ (you can claim £10 under GASDS for every £1 in ordinary Gift Aid you collect) and connected organisations. Given levels of take up so far, government should consider whether some of these rules, especially the matching requirement, are necessary. Their removal would certainly make it easier for organisations to understand and encourage claims. As one respondent said:

“…we also receive donations where donors Gift Aid it so we are able to’ match’ but I would guess that many small charities struggle to meet the matching criteria which means they still miss out. The matching needs to [be] dropped altogether to really make a difference to small charities.”

3. New organisations are missing out

One of the requirements that a charity must meet in order to claim GASDS is that it must have been in existence for two complete tax years.

Paradoxically, it is start-up organisations which are looking to fundraise to generate income that are most likely to benefit from the GASDS. One third of micro and small charities that responded to our survey had said that they were not yet able to make a claim under GASDS because of this rule.

Although there were concerns about allowing new charities use the scheme when it was first proposed, we believe that given the GASDS current performance, this should be reviewed.

What should we do now?

The government committed to reviewing the GASDS after three years, but given its low take up rate so far, we believe that this review process needs to begin now so that potential support for small organisations is not lost.

The review should include representatives from the voluntary sector, so that the needs of small charities are considered at the top table, and it should work with the sector to gather data on the organisations that are eligible for GASDS, so that we can better target support and monitor progress – a similar recommendation was made by the NAO in its report, ‘Gift Aid and reliefs on donations’ (PDF, 470KB).

Have you had problems accessing the GASDS or suggestions on how it could be improved?

We’d like to hear from you. Please leave a comment below.

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Andrew was NCVO’s senior policy officer. He covered issues around funding, social investment, tax and the impact of the economy on the voluntary sector. Andrew has left NCVO, but his posts are kept here for reference purposes.

5 Responses to How do you solve a problem like the Gift Aid Small Donations Scheme?

  1. Ivan Opinion says:

    One factor constraining the number and amount of claims may be that the concern to avoid creating loopholes has meant that the legislation has been written in a manner that actually excludes perfectly legitimate claims. Or, alternatively, HMRC is going out of its way to interpret the eligibility rules as narrowly as possible.

    HMRC has apparently decided that even though each scout group (which usually comprises a scout troop, cub pack and beaver colony) is an independent charity with its own charity registration, they are all “connected” and so the £5000 limit for GASDS claims must be shared between the thousands of scout groups across the country. That’s a few pounds each, so not worth making a claim.

    As I understand it, the rule about connected charities is there to prevent large national charities from artificially boosting their GASDS claims by registering each of their local branches in each town as a separate charity and thus claiming £5000 in each branch. This is achieved by using a special definition of “connected” which seems to apply to scout groups, but was it really intended to prevent scout groups from claiming for things like donations in return for bag packing at supermarkets?

    Scout groups have been separate charities for decades, so we did not set up our structure to try to get extra GASDS claims. And we aren’t just one big national charity. The Scout Association (TSA) is just that: an association of scout groups. But we aren’t owned by TSA (or our District HQs), or set up by them. What happens is that a group of people decide to form a scout group and they decide to affiliate with TSA (though they don’t have to). If they decide to do this then they must follow certain standards set by TSA, but that doesn’t mean we are part of TSA. It just means we follow the rules of the association, which are set for the common benefit of the members. If the group raises money from donations, this money all stays with the group. TSA has the right to appoint Group Scout Leaders, but this doesn’t mean they control the group; it just means that the group proposes someone and TSA carries out some limited vetting to help ensure that the nominee is suitable. This shouldn’t mean that we are treated as connected with all TSA scout groups.

  2. Paul says:

    The connected charity rule is, in my opinion, being over interpreted by HMRC such that the 10,000 Scout Groups in the UK, each is which is an independent charity (registered or excepted), are being blocked from making GASD claims for things like bag packing activities. This is costing many of these small charities a loss in potential income and is not achieving the government’s aims of supporting small local community organisations. If the HMRC simply applied the existing rules with a more reasonable interpretation things would improve without the need for any rule changes.

  3. Desi says:

    It was far too complicated that I couldn’t fathom out which and what we could apply for so didn’t apply

  4. Ian C says:

    HMRC’s interpretation of the “connected charities” rule is weird, as the Scout example shows. Here’s another example. The Church of England is actually more than 13,000 independent charities called parishes (many have been functioning for centuries), each governed by an separate group of trustees (the PCC) authorised by Parliament. But HMRC claims they are “connected” simply because they come under a general administrative umbrella of a regional diocese. Ironically HMRC recognises their independence, as it processes Gift Aid claims from most of them each year!

    When GASDS was first discussed, I suggested that rather than the arcane “community buildings” concept and rules, national “associative charities” (like the Scouts and C of E) should be allowed to register for GASDS their autonomous local branches which had clearly separate governance and accounting, whatever the precise legal status of their branches happened to be. This would have been a simple one-off administrative exercise needing minimal updating, rather than the current complex mess.

  5. k swinyard says:

    Filed our first gift aid claim very easy simple to upload and three days later £142 was in our account. 10mins to register us two years ago and four minutes of data entry. The small cash scheme is simple to do just put in aggregated amount and that’s it.