Keep the Gift Aid Tax Break, UK Fundraisers Say

March 10, 2009, Third Sector — Last month's announcement in the US of proposals to limit tax relief on donations by higher-rate taxpayers has increased concerns about reforming a comparable aspect of Gift Aid in the UK.

Academics in the US are concerned that the proposal could reduce giving by high-income households, and some UK experts fear there could be a similar effect here.

Some in the sector have argued that charities should be able to claim back the higher rate of tax on Gift-Aided donations by higher-rate taxpayers. At present, higher-rate taxpayers can claim for themselves the difference between the standard rate and the higher rate.

HM Revenue & Customs is conducting research to determine whether the reclaimable tax is an incentive to give. A spokeswoman said HMRC was still in the process of commissioning and designing the research.

If the results, due out in September, show the tax breaks do not motivate donors to give, some argue the extra amount should be channelled directly to charities.

But others are warning that any such change could have a negative impact on UK fundraising and question whether the research would be reliable.

Third Sector asked three fundraising experts to give their views.

MARTIN KAUFMAN, HEAD OF DEVELOPMENT, MUSEUM OF LONDON

"If this went ahead it would not only cause a decline in major giving, but it would also cripple the growth of mid-level giving, an important growth sector in fundraising. Higher-rate tax relief is a much more effective tool in mid-level giving - annual or one-off giving of between £1,000 and £10,000 - than in major gifts. By removing this incentive, you increase the risk of donations either not happening or being reduced. The system should be left as it is, but marketing of the link between higher-rate tax relief and Gift Aid must be improved."