A small donations scheme, but a big issue

caron-bradshawCaron Bradshaw is Chief Executive of Charity Finance Group, which works to improve financial leadership in the charity sector. Caron is also part of NCVO’s Members’ Assembly. This is the latest post in our manifesto series.

What is the Gift Aid Small Donations Scheme?

One of the more helpful interventions of the last government was the creation of the Gift Aid Small Donations Scheme (GASDS).

For those of you who don’t know what it is (and my experience indicates that this is probably most readers), GASDS enables charities to claim 25% top-up payments on cash donations of £20 or less, without the need for a Gift Aid declaration.

The scheme is important for two main reasons. Firstly, it helps level the playing field for those that donate to charities via cash, which remains the primary form of giving for the public. Secondly, it should help (and encourage) small charities to fundraise through street collections or events in community buildings.

In the last Budget, the Chancellor increased the amount that charities could claim through the scheme from £5,000 to £8,000 – meaning that charities can now receive up to £2,000 in top-up payments from the government per year.

While this increase in the limit is welcome, and was one of the recommendations we made as part of a joint briefing with NCVO and the Institute of Fundraising, the amount that you can claim through the scheme is not the central issue.

Progress so far…

When GASDS was first introduced, the government estimated that the scheme would cost £50m in its first year, with a small cost for setting up the scheme and ongoing IT costs. However, the latest figures say that the scheme only cost £6m in 2013-14. In its second year, 2014-15, HMRC is predicting it will cost £23m, around 70% lower than the government’s initial estimate of £85m.

Charities can claim back for up to three years, so maybe these figures will rise in subsequent years. There are also some who will dismiss the original estimate as merely the usual ‘back of a fag packet’ calculation which was always going to be wrong.

But from where I’m sitting, charities are losing out on tens of millions of pounds of top-up payments from government, at a time when every penny counts.

Given the significant underuse of GASDS so far, CFG doesn’t think it is unreasonable for the government to bring the review planned for spring 2016 forward, to start straight after the election. After all, every day that the scheme is not properly reformed means more money lost for charities.

But what should be changed about the scheme?

Getting back on target

NCVO’s manifesto outlines a couple of ways that the scheme could be improved, and I think overall there are three changes that should be considered:

  1. Abolish the eligibility criteria so that any charity registered for Gift Aid can claim through the Gift Aid Small Donations Scheme. This would remove unnecessary complexity and ensure that start-up charities, which often need the most help in fundraising, are not disadvantaged.
  2. Remove the matching requirement. At the moment, a charity can only claim up to the maximum in top up payments (£8000) if it receives £800 in donations which are eligible for Gift Aid. Again, this disadvantages smaller charities and does not provide a significant incentive for small organisations to do more fundraising and use the scheme.
  3. Widen the scope of donations that are eligible. At the moment, you can only claim on cash donations. For example, small charities often receive cheques where it may not be cost effective to go back to the donor and claim for Gift Aid. Widening the scope of the GASDS to other forms of one-off donations where a Gift Aid claim cannot be easily sourced could help improve take up and support small charities.

There also needs to be more investment in communicating and promoting the scheme, preferably as part of an overall campaign to raise awareness of Gift Aid, as we outlined to our members in a pre-election briefing.

No need to reinvent the wheel

Creating the best possible environment for giving should be one of the top priorities for the next government.

Luckily for the next government, there is no need to reinvent the wheel. Reforming the GASDS and better promotion of Gift Aid would go a long way to improving the giving environment for charities. I’m glad that NCVO put GASDS in its manifesto and we will work closely with them, and other partners, to put this at the top of the next government’s agenda for the sector.

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4 Responses to A small donations scheme, but a big issue

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  2. Dave Ellis says:

    Every Air Cadet squadron has its own fund which is an excepted charity and are recognised by HMRC for Gift Aid. However, HMRC maintains that we are not eligible for GASDS on our bucket collections as only the main Air Cadet Organisation fund which is a registered charity can be eligible. This seems unfair as it is only the individual Sqns that make bucket collections.

  3. John W Brown says:

    Many Scout Groups face the same problem as Air Cadet Squadrons. All Scout Groups are excepted charities but some (not all)are also individually registered with the Charity Commission and have their own unique charity numbers. However, HMRC staff seem to think that only the UK Scout Association (which is the governing body for all Scout Groups) is eligible to claim for bucket collections, which is useless and unfair. This really does need to be sorted out.

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