The old system
The current Gift Aid system requires donors to ‘opt-in' to Gift Aid by completing a declaration. In practice, the inertia associated with the completion of this declaration is the single greatest barrier to maximising Gift Aid claims for UK fundraising organisations.
A new proposal
As a means of increasing the legitimate take-up of Gift Aid, and subsequently the income of fundraising organisations, we are investigating a proposed move towards an opt-out system. This would assume that donors would want charities to reclaim the tax on their gifts unless they consciously opt-out. Donors could opt-out, if they do not pay enough tax to cover the donation(s) or if they simply choose not to take part.
How would it work?
To enable an opt-out system, fundraising organisations would explain the Gift Aid requirements, prominently and simply, in all relevant fundraising materials, which would give donors the opportunity to opt-out of the scheme. There would be no fundamental changes to the current system that provides a link between the donor and gift, as the organisations would be required to identify and maintain records of supporter gifts, donors' names and addresses (often through automated systems which are traceable through to the tax claim).
Where unsolicited donations were made, or the opportunity to opt-out had not been given, a confirmation letter could be sent to donors, explaining that their donation would be treated as eligible for Gift Aid, unless donors notified the organisation within 30 days. A notification that this letter had been sent could be retained on the fundraising organisation's database, together with a copy of the letter.
How could it improve the system?
- An opt-out system would overcome the inertia that prevents many declarations being completed and enable Gift Aid claims to be increased.
- It would simplify the process of legitimate Gift Aid claims for fundraising organisations and HMRC, whilst retaining the link to the accounting statements.
- Through increased and clearer communication, the instances of ineligible donors inadvertently being included would be minimised.
Will it really make a difference?
Two of the largest UK fundraising organisations have estimated that an opt-out system would increase their Gift Aid claims by £3-£5million each.
The Institute of Fundraising is continuing to work with the Association of Chief Executives of Voluntary Organisations, Charities Aid Foundation, Charity Finance Directors Group, Charity Tax Group and National Council for Voluntary Organisations to explore the potential of an opt-out system and lobby for change.
