This morning HMRC published research on Gift Aid and understanding donor behaviour (PDF, 828KB).

NCVO welcomes the government’s decision to conduct research into Gift Aid and this will hopefully lead to a better informed debate about how we can improve uptake of this important tax relief.

Gift Aid is already worth over £1bn to the voluntary sector, but according to the National Audit Office around £2.3bn of donations are not currently being claimed for Gift Aid. While not all of these donations will be eligible, charities are potentially losing out on hundreds of millions of pounds of tax repayments. At a time when charities are facing a significant squeeze on their resources, it is good to see the government working with the sector to think about how we can reduce the number of charities missing out on Gift Aid claims.

This is only a small piece of research, but it does highlight some interesting challenges around increasing Gift Aid uptake. Here is my analysis of the report and what I think we should take from it.

1. Education, Education, Education

One clear message from the research is that donors’ understanding of what Gift Aid is what determines whether or not to claim. Those donors that are well informed about what Gift Aid is, the potential benefit for the charity and their own eligibility are most likely to claim. Those that do not understand what Gift Aid is, underestimate its value to charities and do not understand whether they are eligible are not likely to claim – even if they should.

There are other barriers to claiming. The burden of form filling (something we can all sympathise with!); concerns around data protection and concerns about being subject to excessive communication from the recipient charity also feature. However, misconceptions about Gift Aid, are highlighted throughout as the main obstacle to promoting uptake.

2. Volunteers have a key role to play

The research also stresses the importance of volunteers, friends and other respected individuals, in forming people’s views about Gift Aid and whether they should claim. Those taking part in the research often stated that they started claiming Gift Aid once someone had explained it to them, correcting misconceptions and convincing them of its value.

Charities with volunteers should consider whether they are providing them with enough information to make a convincing case for claiming and ensuring these key messengers feel confident in being advocates for Gift Aid.

3. Gift Aid shouldn’t just be an afterthought

For most donors, Gift Aid is just something stuck on at the end where are we are asked to provide details and tick a box. The research indicates that this approach to Gift Aid can be a significant barrier to claiming, as it divorces Gift Aid from the donation. This leads donors to feel that Gift Aid is not important or linked to what they are giving, feeding misconceptions or encouraging errors.

In testing various messages, the research found that providing donors with concrete examples about how Gift Aid was supporting the charity’s objectives could be very effective, particularly if donors felt a personal or emotional connection to the charity’s work.

So charities should think about how they are presenting Gift Aid and whether there are ways that they can make claiming more central to the giving process as well as demonstrating its value to donors, if they want to encourage take up.

4. Donors are creatures of habit

This isn’t revolutionary (and certainly won’t be news to any professional fundraisers reading this), but the research makes a compelling case for how once donors have made a decision about Gift Aid, it becomes very difficult to shift it. This is particularly concerning for those that should be claiming Gift Aid but don’t currently do so.

The report indicates that changing the Gift Aid Declaration, changing the method of giving (moving people from paper to online giving, for example) and putting a new Gift Aid message up-front when asking for a donation, can ‘disrupt’ these patterns of behaviour. However, the trick for charities is how to challenge these ‘negative’ habits without losing out on donors that are eligible and currently claim Gift Aid.

What next?

The government is already working with the sector to improve the Gift Aid Declaration, following calls from NCVO and others, to make it shorter and simpler for donors to understand.

However, as the research points out, there are limits to what the Gift Aid Declaration can achieve on its own. Given the  link between a strong understanding of Gift Aid and claiming, the government should consider a proposal made by NCVO and other voluntary sector representatives ahead of the Autumn Statement, for funding to support a voluntary sector-led campaign to promote Gift Aid.

No single change is likely to significantly improve Gift Aid uptake. However, a combination of a new Gift Aid Declaration, a promotional campaign to educate donors on Gift Aid, smarter presentation of Gift Aid by charities and more information for key messengers such as volunteers, could help to considerably boost claims and increase the value of donations to charities.