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Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
Red Cross Gift Aid and digital our response to the Government consultation sept 2013
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Red Cross Gift Aid and digital our response to the Government consultation sept 2013

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We are concerned that if the shortened declaration, which seeks to transfer the tax liability from the donor to the charity is not adopted, then HMRC may introduce …

We are concerned that if the shortened declaration, which seeks to transfer the tax liability from the donor to the charity is not adopted, then HMRC may introduce
supplementary wording to the declaration to make this provision explicit which we believe would deter donors and have a devastating impact on the take up of Gift Aid.

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  • 1. 1 British Red Cross response to Gift Aid and Digital Giving consultation Executive summary The British Red Cross (BRC) welcomes the Government’s consultation on Gift Aid on donations made through digital channels and is grateful for the opportunity to raise concerns and provide suggestions on how to improve take up of Gift Aid in this area. The consultation document sets out three proposals; options for a revised Gift Aid declaration; two possible models for non-charity intermediaries to collect and distribute Gift Aid to charities; and a universal Gift Aid declaration database to allow donors to sign a single declaration to cover all donations to charity. We believe that with the exception of proposal two (the appointment of non-charity intermediaries) none of the proposals outlined in the document will help to address the current issues faced with take up of Gift Aid in the digital arena, specifically donations made by text. This is because donors are required to input their name and address, along with their Gift Aid consent as part of a second transaction and very few donors are motivated enough to complete this second stage on a mobile device, as it is awkward and time consuming. We are concerned that the proposals put forward in the consultation do not effectively address the primary objective of increasing the take up of Gift Aid and if adopted, could put current arrangements at risk, such as the proposed changes to the Gift Aid declaration and the introduction of a universal Gift Aid declaration database. A full response to the consultation questions can be found on page three, but we have summarised these concerns below. 1 Gift Aid declaration The tax note that accompanies the Gift Aid declaration confirms that the donor has to have paid enough income / capital gains tax to cover the donations they make to charities and Community Amateur Sports Clubs throughout the tax year, but there was never an explicit requirement for the charity to make the donor aware that they would need to cover any shortfall, as suggested on page 11 of the consultation document.1 1 *We note in appendix one, that the advice online has now been changed, but we are not aware of any formal consultation and believe this to be a fundamental change, which needs discussion.
  • 2. 2 We are concerned that if the shortened declaration, which seeks to transfer the tax liability from the donor to the charity is not adopted, then HMRC may introduce supplementary wording to the declaration to make this provision explicit which we believe would deter donors and have a devastating impact on the take up of Gift Aid. Furthermore, whilst it may be beneficial for charities to offer to repay the tax on some gifts for commercial reasons (i.e. to preserve the good will and future gifts from the donor), we cannot agree to this as a default system, since the level of liability is unknown and could place an unnecessary burden on the charity, if it has to repay money that has already been committed. 2 Non-charity intermediaries We are broadly in favour of non-charity intermediaries collecting and managing Gift Aid on behalf of charities in areas where it is not currently possible for charities to do this effectively themselves, due to the ‘anonymous’ nature of the gifts, specifically donations made by SMS text and donations made by direct credit using the faster payments bank system, or the new to launch ‘mobile to mobile’ payment system. We foresee a potential obstacle in pursuing this proposal will be that the intermediaries we have put forward as potentially adding value (mobile phone operators / Banks) will not be interested in taking on this role. We encourage the Government to work with non- charity intermediaries to fulfil this role. 3 Universal Gift Aid declaration database We do not believe a universal Gift Aid declaration database (UGADD) would be feasible if the charity has to rely on the donor confirming their unique reference number (URN) because the information would not necessarily be retained by the donor in any reliable way. In the absence of a URN charity data would have to be matched using other common criteria like name and address, which would add complexity, and time and the match criteria is likely to degrade with time. We acknowledge that there would be some administration cost savings if a universal database existed, but would be concerned if the UGADD superseded existing agreements, namely enduring declarations already held by charities, because it is unlikely that the UGADD system would be able to match the number of individual agreements held by the charities themselves and so the potential level of tax recovery would be negatively impacted. BRC’s vision for Gift Aid and mobile text donations We see Gift Aid claimed on mobile text donations as an area of potential growth and would be open to working with HMRC and non-charity intermediaries to explore how we can improve the take up of Gift Aid in this area. We have included in our detailed feedback a couple of options for consideration, including a revised declaration (appendix two), which does not transfer liability for any shortfall to the charities and / or intermediaries.
  • 3. 3 However, we firmly believe that the only way to improve take up of Gift Aid across the board, would be to embrace a system where Gift Aid is claimed on all eligible donations, without the need for a Gift Aid declaration. In our view charities ought to be able to simply submit a list of all the qualifying donations they receive using the existing online claim template, with HMRC cross checking against their database of tax payers and repaying the tax on the donations where an individual has paid sufficient tax to cover. This would relinquish the need to maintain a Gift Aid declaration, bringing about substantial savings to the charity and remove the risk of any shortfall, negating the need for HMRC to recover tax from either the charity or the individual. BRC response to consultation questions We have attempted to answer each question raised by the consultation paper in sequence and where no comment was applicable, this has been stated. However as a general note we felt that the paper itself went much further than looking at the issues around digital giving and Gift Aid and raised some very serious concerns regarding the future of Gift Aid and proposals that could potentially put current arrangements at risk. Detailed feedback has been given in relation to these concerns in the relevant sections, with alternative suggestions put forward for consideration. These are summarised in the executive summary as well as at the end of this paper and we hope that the Government will give these suggestions some thought. Chapter 1: Introduction Question 1. Are there any general points about Gift Aid that you would like to raise with Government? We believe that the changes made earlier this year, which required charities to add an additional reference to charity amateur sports clubs in the tax note was superfluous, as was the stipulation that VAT and Council Tax do not qualify for the purpose of Gift Aid and we do not understand the perceived lack of clarity in the original statement which served us well for over a decade. The online claim system does not allow repayments to be made as itemised values within the claim and requires that any negative balances be confirmed as an aggregated balance. This does not help HMRC to identify where a repayment has been made by the charity and we believe that this may result in them chasing a shortfall where it is not due, because it has already been repaid by the charity. We feel that unless repayments are managed as itemised transactions on a claim, then the audit trail will break down.
  • 4. 4 The claims we have been submitting via the online portal are taking much longer to be repaid. We suspect that this is due to the size of the claims, but the efficiencies we had hoped for are not currently being realised. We have also fed back previously that HMRC sometimes make minor alterations to guidance notes online (without these being notified via RSS feeds) that could have a major impact on process (Appendix One). We would urge HMRC to look at evolving a system whereby individuals can subscribe to pages and receive alerts when the content has been changed, as we believe that it is both unreasonable and impractical for HMRC to expect charities to keep checking the guidance notes on such a substantial document. Question 2. Beyond digital giving, what other barriers to take-up of Gift Aid do charities experience? The barriers to digital giving are in our experience confined to giving by text and not to online giving per se, where the sector has been successfully collecting and receiving online donations with Gift Aid since 2000. Some charities have even successfully developed integrated web systems that link into their database, enabling the donor to update their address, amend their preferences and check their Gift Aid tax status. Although we acknowledge that many online pages are now accessed via mobile devices, text donations are still our primary area of concern, since this is where the potential shortfalls lie. The barriers we face with text donations are the same as those presented by any payment method where the giving portal allows an anonymous response, since we need the name and address of the giver in order to claim Gift Aid. In this respect, appointing intermediaries who are already privy to this information (mobile phone providers for text, banks for ATM donations, or retailers who offer a round up facility), will help to alleviate this problem, in the same way that intermediaries like Just Giving have helped to alleviate problems around collecting the details of sponsors. However, we still face difficulties with paper sponsorship forms where the participant will often complete the form on behalf of their friends and family, thus invalidating any Gift Aid, since there is no evidence of participation in the Gift Aid scheme on behalf of the sponsor and a pragmatic approach would be welcomed in these circumstances. The donor benefit rules in relation to challenge events are also hard to manage, since one could argue that all sponsors are in some way connected to the participant and under the rules this would disqualify their payments. The donor benefit rules generally are very complicated and are particularly restrictive in relation to charity auctions and charity events, where the primary goal is always to raise money. The fact that a declaration can be applied to past and future gifts may act as a barrier for some donors whose personal circumstances are subject to consistent change and these individuals may choose to withhold consent all together.
  • 5. 5 This is a loss to the charities, but one which we do not believe will be counter balanced by making the charities wholly responsible for addressing any shortfalls. Question 3. Do you think a phased implementation of the changes to Gift Aid proposed in this consultation document would be the best way to proceed? It is not clear what changes the Government intends to implement as the consultation highlights a number of options for consideration, some of which would simply not be operationally viable and we would be very concerned if changes were implemented without full consideration of impact. Question 4. What new promotional materials – leaflets, website materials and other products – could the Government usefully provide to help increase take-up of Gift Aid? None. Question 5. What should these materials contain to be most helpful in encouraging donors and charities to use Gift Aid? N/A Question 6. Might rebranding Gift Aid help increase take-up? How? No Question 7. How can the Government work with the charity sector and its representatives to disseminate promotional material on Gift Aid? The HMRC website is a daunting landscape for the average donor and it would be useful to have a mini site which explains the rules in layman’s terms, so that individuals are assured that they are taking the right decision to Gift Aid. It would also be useful for donors to have some mechanism for checking whether they have paid sufficient tax for their donations to qualify for Gift Aid. Gift Aid on the revenue generated from donations on stock is still misunderstood and the advice on this could be clearer as could the advice around tax paid on private pensions / savings. Chapter 2: The Gift Aid declaration General Note - On page 11 of Chapter 2, there is a suggestion that a key part of the Gift Aid process is the charity’s explanation to the donor that they will have to make up the shortfall in the tax on their donation if they have not paid enough tax to cover. However there is no element of the tax note that makes this explicit, saying that ‘you need to have paid enough tax to cover’ is not the same as saying that you will ‘have to make up the shortfall if you don’t’. We are very concerned that HMRC may introduce supplementary wording to make this provision explicit, in order to manage the expectations of donors who will start to see tax
  • 6. 6 repayment requests coming through, following the introduction of the online claim system which allows HMRC to more effectively evaluate any shortfall on tax paid. It goes without saying that any supplementary wording would have a devastating impact on the take up of Gift Aid, as well as calling into question the validity of past declarations and we would welcome some clarification and re-assurance on this point. The option to shorten the declaration in order to transfer liability for unpaid tax from the donor to the charity is being put forward as a benefit to the charity, however this option will also serve as a benefit to HMRC as it makes their recovery of tax that much simpler. It is also worth noting that a claw back system would create an unnecessary burden for some charities, because they could receive a tax demand at any time, which would make it difficult for them to plan and budget their expenditure. Question 8. Do you agree that it would be helpful to enable charities to shorten the Gift Aid declaration in this way, provided they were prepared to accept liability for a charge to tax where the donor had not paid enough tax to cover the Gift Aid? We feel that the proposal to shorten the Gift Aid declaration in order to enable charities to adapt the declaration to fit digital methods of giving is misguided. It is true that the take up on Gift Aid for digital payments like text to donate is small, but this is because donors currently have to be re-directed to a new page in order to complete the declaration and many donors giving this way are not sufficiently motivated to do this. However, this would not be a problem if we were able to acquire their contact details from the mobile phone providers, as we could always contact them subsequently as we do now with other spontaneous donations. The length of the Gift Aid statement (taking into account the comments already made in relation to the supplementary wording recently introduced) is not a problem for other payment methods and we have worked with the tax note for over a decade. Whilst it would be desirable in the interest of donor care, to have a mechanism whereby we could offer to repay the tax for some donors, we would not want this to be the default option, because it would create an unnecessary and unpredictable burden on the charity. Furthermore, unless the Government is suggesting that charities relinquish the enduring declarations that they already hold which clearly transfer the tax liability to the donor, we find it difficult to visualise how HMRC / the charity would operate a system which allowed for two different types of declarations. Our fear is that it would simply not be viable in practice and that acceptance of this proposal will lead to the erosion of the validity of existing declarations we have worked hard to acquire and maintain all these years. If we are considering an amendment to the declaration wording for text donations alone, then the wording could be shortened working within the existing framework of ‘one off declarations’ where the tax note is less relevant (please see appendix two).
  • 7. 7 This would also overcome the issue identified on page 31 of the consultation paper where HMRC, state that a mobile phone number cannot be considered as being unique, effectively ruling out the legitimacy of an enduring declaration solicited on a previous transaction.2 Question 9. Do you think a reasonable limit for individual donations that can be made using a shorter Gift Aid declaration, as set out in Proposal 1, would be £1000, £5000 or somewhere in between? If not, what limit would seem reasonable & why? We think that it is artificial to set a threshold, because many donors give small amounts over a four year period that may amount to a substantial sum over the term, so the outcome in terms of a repayment might be the same for someone giving £20 a month over four years and someone giving £1000 as a one off gift. We also have some doubts in relation to a two tier system, which we believe would be more complex to manage and would only add confusion. Furthermore it may be worth noting that charities might be more likely to want to settle any shortfalls for high value donors, disregarding any liability, because they want to preserve future income from this group who are as prone to misunderstanding as any other donor. Question 10. Given the complexities outlined above, how do you think a tax charge should fall to charities where a donor has only paid enough tax to cover some of the Gift Aid on donations they have made in the year? We do not feel that there is any reasonable way that this can be managed. If delivered on a first come, first served basis, as smaller charities who submit claims less frequently would always lose out. The fairest way, if such a system were to be introduced would be to make all charities proportionally liable in respect of any shortfall. Question 11. Do you agree that HMRC should be able to tell charities which donations tax charges relate to? We believe that it would be unreasonable of HMRC to recover tax without giving us the details of the individuals, as charities need to update their records so that they are not continually claiming tax relief for these individuals. Charities also need to record where a repayment of Gift Aid has already been made, in the event of a payment being refunded for example, which would initiate an automatic repayment of Gift Aid to HMRC under current practice. However, we also acknowledge that any additional statements added into the Gift Aid declaration to allow for these future disclosures are likely to add sensitivity, increase anxiety and suppress take up on Gift Aid. Question 12. Bearing in mind the need to retain a link to donors’ tax affairs in order to retain Gift Aid’s status as a tax relief, are there any other changes you think it would be possible and helpful to make to the Gift Aid declaration? 2 HMRC agreed to review their position in relation to mobile numbers at a meeting held with the Charity Tax Group in September 2013.
  • 8. 8 Given that HMRC now has an automated mechanism to check whether donors have paid sufficient tax to cover the claims submitted by the charity, we ask ‘why’ it is still necessary for donors to complete a Gift Aid declaration at all? We believe that technology has advanced to such a degree that charities ought to be able to simply submit a list of all the qualifying donations they receive using the existing online claim template. These donations could then be cross checked against the HMRC database of tax payers and the tax repaid only on donations where the individual has paid sufficient tax to cover. This would still be operating as a repayment of tax, using the existing framework, but with the added benefit that charities will no longer have to maintain hundreds of thousands of Gift Aid declarations, which would be a massive saving for the sector, it would also reduce the level of audit required and effectively eliminate the risk of a shortfall arising. If there is still a requirement for donors to give consent, this could be managed as an opt out option, with donors given the opportunity to ‘decline’ to have their tax used this way, although one could argue that tax paid is for the Government to disburse as it sees fit. The ‘opt out system’ has been put forward by the sector many times before as being the only viable option for increasing take up on Gift Aid and we would urge the Government to explore this option more fully. Chapter 3: Gift Aid: a greater role for intermediaries Question 13. What intermediaries exist now? If the Government makes changes to Gift Aid to make it easier to claim on donations made through intermediaries, what new intermediaries might emerge to support donations to charity? We are wholly reliant on intermediaries such as Just Giving, who make it easier for event participants to manage their sponsorship and whilst we have entertained the idea of developing similar online platforms, companies such as Just Giving are now so well established, that the benefit would be questionable. New intermediaries that we would welcome would be companies that manage payments made by mobile phone, because we are not currently privy to the name and address data for these individuals, although we believe that if a legal precedent was set, that allowed the mobile phone providers to provide us with this data assuming implicit consent, then there would be less need for us to press for this option. However as it currently stands charities face a problem reconciling payments which are clawed back by the mobile phone companies because the telephone numbers are not confirmed as part of this recovery, compromising the validity of the entire claim. Having an intermediary that has access to the donor’s personal information would overcome this problem. Other potential intermediaries are the banks, especially with the introduction of mobile to mobile payments using the ‘faster payments’ system. These payments are likely to give rise to greater numbers of ‘anonymous’ transactions and so there is value in the banks holding declarations. These could also be used to cover donations made via ATM machines.
  • 9. 9 Question 14. What are your views on the requirements placed on non-charity intermediaries and the regulatory powers the Government would need to take under Proposal 2? We feel that intermediaries should work under the same statutory framework that is currently applied to payroll giving agencies. This would give the charities and the public greater confidence and ensure that money reaches the designated cause. Question 15. What sorts of features do you think intermediaries would need to have to have? What sorts of organisations should be able to be intermediaries? Any organisation claiming Gift Aid on behalf of charities would need to demonstrate that they are competent financial administrators and be subject to external audit. Small operators are unlikely to offer a credible portfolio, but organisations like phone companies and banks that are already subject to external regulation, should be amenable if there is an incentive for them to take on this additional burden. Question 16. As set out above, the Government intends to put in place two requirements under Proposal 2 – a time limit on declarations, and a requirement to ask donors if they wish to Gift Aid each donation – to reduce the risk of Gift Aiding a donation in error. Are there other methods to protecting donors against the risk of over claiming? We are not sure why payments made through intermediaries are any different to payments made by donors generally, since donors may potentially forget which charities they have given declarations to and although we remind our donors that they have a declaration on record with every appeal letter we send, not all charities do, so presumably the risk of over-claiming is the same. This proposal potentially puts all enduring declarations at risk, which would be a great concern for regular payments received via direct debit, as we place a lot of reliance on the open declaration. It will not be long before we are soliciting regular payments by mobile phone, which we would want the intermediaries to manage tax efficiently and they would not be able to do this if they were presented with the obstacle of a time limited declaration. The only way to really avoid over claiming is to re-solicit consent each time, which would not be a desirable option, as offering an option to opt in every time is likely to undermine the return considerably and does not lend itself to regular payments made via direct debit or standing order. Question 17. Would it be helpful to place a requirement on intermediaries to inform donors how much they had donated that year, with the amount of tax required to cover Gift Aid on those donations? This would be helpful, as donors do lose track, although the intermediary can only analyse income made via them, other payments discharged directly to the charity or other charities would not be included in this evaluation and this would need to be made clear. Question 18. Do you think intermediaries will offer to claim Gift Aid on behalf of charities as set out under Proposal 2?
  • 10. 10 Some operators might be willing to do this for the additional income they can generate from administration fees, but some may need an added incentive to take on this responsibility. Question 19. What do you think the consequences of the intermediary taking on liability might be? We would imagine that they will seek to contractually bind charities so that they can recover any shortfalls they have had to repay, which makes it even more critical that they are companies who are properly vetted and audited. Question 20. If the proposals in Chapter 2 are adopted, do you agree that the liability for tax charges arising where the donor has not paid enough tax to cover a Gift Aided donation should fall to the intermediary? Or would it be more appropriate for the liability to fall to the charity? As above. We think that the charge should be levied against the intermediary, but they are likely to seek recovery from the charities. Question 21. What might be the advantages and disadvantages of Proposal 2 for charities? The intermediaries we are seeking are in the areas where it is currently not possible to claim Gift Aid effectively (e.g. mobile phone payments) so any disadvantage (admin charge) is negligible compared to the considerable advantage of being able to claim on a greater proportion of these gifts. Question 22. How can charities’ relationships with donors be protected under Proposal 2? Donors do not necessarily see that they have a relationship with the charities under current intermediary relationships (Just Giving), even less so through other channels like text to donate. However, we would like the opportunity to nurture relationships with them and to also contact them in the future with say an emergency appeal. We imagine that we could still do this through agreement with the intermediaries around disclosure of data, on a consent basis and that charities would still be entitled to the mobile phone numbers at the very least. Question 23. Do you think Proposal 2 would lead to an increase in Gift Aid going to charities? What is the evidence for this? Charities currently face a problem reconciling payments received by text, due to the absence of audit trail for payments which are clawed back by the mobile phone providers and having an intermediary in place that is privy to the personal data relating to ‘claw backs’ would overcome this obstacle. It would also overcome the issue of donors having to complete a declaration, subsequent to their making their donation by text, because they could sign up to Gift Aid when they set up their mobile agreement and would additionally address the issue of mobile phone numbers being re-cycled as the declaration would be tied to the account holder rather than the number.
  • 11. 11 Question 24. Do you think Proposal 2 would lead to an increase in overall donations to charities? What is the evidence for this? There is no evidence to suggest this. Question 25. What are the advantages and disadvantages of Proposal 3 over Proposal 2? Proposal 3 is not desirable and we would not welcome this development. It is our belief that intermediaries will be more effective if they are ultimately responsible for the outcomes of their administration. If the intermediaries simply acted as a conduit, maintaining declarations, then there is a greater risk that the data will not be maintained with the same level of due diligence. Question 26. What are your views on the option that both Proposals 2 and 3 should be available in parallel? We would only want to pursue proposal 2. Proposal 3 is closer to the vision of a universal declaration discussed later in the paper, which is not without its issues. Question 27. Do you agree that intermediaries should be liable for invalid Gift Aid declarations and any repayments required or penalties issued in relation to these? Or should charities be liable, given they will have received any Gift Aid paid out on these incorrect claims? If intermediaries were soliciting declarations that were invalid then we would be very concerned, as this would imply that they did not fully comprehend the rules and they ought to in these circumstances be fully liable for any penalties as this will help to ensure that they discharge their duties more effectively. However, it is unlikely that intermediaries will accept their role, if they cannot recover any Gift Aid they have to repay, back from the charities, since they are not the beneficiaries of this income. Question 28. If Proposal 1 (in Chapter 2) and proposal 3 are adopted in combination, should the charity be liable for tax charges where the donor has paid insufficient tax to cover the Gift Aid on the donation? Or should the liability for the tax charges fall on the intermediary? We oppose proposal 1 (chapter 2) for the reasons previously stated and there is no reason why the intermediary would not be able to implement a system whereby the donor was fully aware of their responsibilities regarding any potential shortfall of tax paid. A way of reducing any liability to the donor would be to make the declarations operated by intermediaries time limited, which this group of donors may prefer, especially as their declarations cover multiple charities. Question 29. Would intermediaries be content to operate Proposal 3? We cannot offer an evaluation on this. We presume that proposal 3 would be easier for them to manage, but we would be reluctant to pursue this option over proposal 2.
  • 12. 12 Question 30. What would be the advantages and disadvantages to charities of Proposal 3? Are there any advantages or disadvantages for donors? The disadvantage to the charity is that in the event of an audit, the charity would have to recover Gift Aid declarations that were maintained by a third party and this adds an element of risk. There is also the potential for these companies to be bought out or collapse, which again puts the declaration at risk. Question 31. Do you think additional HMRC guidance and support would help digital providers to operate Gift Aid more efficiently and make it easier for donors to claim Gift Aid on their donations through digital channels? Yes. There is a lot of misinformation in the sector, perpetuated in no small part by the operators of text donations. The fact remains that the audit trail for these donations is not sufficient to allow for Gift Aid to be claimed. Giving the operators a licence to disclose the personal details of the donors would help to overcome this obstacle. Question 32. What sort of support could HMRC usefully provide in this area? The mobile phone providers suggest that they cannot make disclosures under data protection, but we do not believe that this is a valid position as donors can assign consent. The only assistance that HMRC can provide in this arena as it currently stands is to clearly set the level of acceptability in relation to donations that are anonymously clawed back, so that there is no need to evaluate whom these relate to. Question 33. Would more support in this way be sufficient to improve the user experience of Gift Aid? N/A Chapter 4: A universal Gift Aid declaration database Question 34. What model for a UGADD would you prefer to see in place? We do not believe a universal Gift Aid declaration would work, if the charity had to place reliance on the donor confirming their unique reference number, because the information would not be retained by the donor in any reliable way. The only model that might work is where a central database is referenced prior to a claim being made, however it takes a lot of resource and commitment to keep a database up to date and to ensure that data is formatted in such a way that would allow matching. This is evidenced by the difficulties charities have encountered in preparing their data for upload to the online claim system. Common data such as address line 1 and post code may be formatted differently across different databases. There are also name changes (due to marriage or divorce) and variations of name like ‘Elizabeth / Betty’ to consider. Question 35. What are the advantages and disadvantages of a UGADD compared to either Proposal 2 or 3 set out in the previous chapter, for charities, donors and intermediaries?
  • 13. 13 A UGADD would diminish the need for charities to maintain Gift Aid declarations, which would bring some resource savings over time. However, referencing a UGADD would add time as well as complexity to the Gift Aid claim and negates the value of speeding up the process through the development of the online claim system. Well established charities already have robust systems in place to manage their Gift Aid declarations and we would be concerned if the UGADD was intended to supersede existing agreements in place as charities have significant volumes of enduring declarations already on file and would be very concerned if these ceased to be relevant under this proposal. If the introduction of a UGADD is intended to supersede, then we are confident that the sign up rates for a universal Gift Aid Declaration would not in any way match the rate of GADs already held by individual charities who have nurtured relationships over time and we believe that our claims would be significantly negatively impacted. Question 36. How might the introduction of a UGADD fit with charities’ current systems for managing Gift Aid? Would the benefits outweigh any costs? We cannot make a reasonable assessment of benefit in order to judge whether this outweighs the cost of maintaining a central system, but we believe that the benefits would not be material. The only desirable outcome would be as previously suggested, that Gift Aid is managed as an opt-out system, with HMRC checking the tax status of individuals on submission of claims by charities. This would relinquish the need to maintain a declaration and remove the risk of over claiming. Question 37. What functions should a UGADD have, and why? A centrally managed system would allow donors to cancel the arrangement more easily, which would be a benefit as currently they must do this with each charity assuming they can recall where they have given consent. But we would be concerned that there would be no effective process in place on a centrally managed system to manage name and address changes, or agreements in place to ensure that any changes are effectively communicated back to the charities, so that they were maintaining the same data sets in order to maximise the match rate. The above would obviously involve data sharing and agreements would need to be put in place to allow for this. Question 38. What information should a UGADD pass on to charities about their donors? How, and why? We assume that the UGADD would simply be holding data that charities are already privy to, namely name and address. However if a central database did exist, charities would probably want the opportunity to analyse giving trends across the sector. Question 39. Should Gift Aid be claimed directly by the charity, or should the UGADD claim the Gift Aid on the charity’s behalf?
  • 14. 14 If we move to a central database, then there is little advantage in the charity submitting the claims. However, the concern with any third party operator is the level of resource allocated to maintaining credible data. Charities have every motivation to do this, because it is their bread and butter, but a third party may not be motivated in the same way. We also assume that there would be a cost to the service, which would not necessarily be capped and this would hold the charities at a disadvantage. Question 40. How could a UGADD best be encouraged to emerge? What might be the best role for Government in supporting a UGADD’s development? We would only wish to pursue this if the UGADD was evolved within HMRC’s own framework, rather than operating through a third party. Question 41. How should the UGADD and charities identify donors, given the Government’s requirements on accuracy and security as set out above? Would donors find this easier than providing a new Gift Aid declaration? As above Question 42. How can a UGADD be developed in a way that allows access for a wide range of charities? As above Question 43. Where a Gift Aid declaration has not been taken correctly so it is invalid, should the UGADD administrator or the charity be liable for the repayment of the Gift Aid? Why? A third party operating a UGADD should be wholly responsible for the integrity of the data that it holds. It would be inappropriate for the charity to be liable. Question 44. Where a donor has paid insufficient tax to cover a Gift Aid claim made on a donation, should the donor, the charity or the UGADD operator be liable to make up the shortfall in tax? Why? The issues are the same, whether operating through an intermediary or a UGADD. The operator ought to be wholly responsible for data integrity and any penalties, but any tax shortfalls would ultimately have to be recovered from the beneficiary or the donor. Question 45. How can the Government get sufficient assurance that taxpayers’ confidential information is adequately protected by the operators of a UGADD? Presumably they would have to operate under the same data security standards as charities and other organisations handling data and be registered with the Information Commissioners office. Question 46. How much do you think it would cost to build and/or administer a UGADD, and how do you get to that figure?
  • 15. 15 It depends on whether the database is simply holding declarations that can be referenced or facilitating claims, which would make the database more complex, but at a guess, we would estimate between 3-5 million. The main costs however would be the on-going resource costs for data capture, data hygiene and data maintenance, as well as server storage costs of the declarations which we assume will be scanned, back-ups and disaster recovery. There is also the question of how the initial solicitation of a universal Gift Aid Declaration would be resourced. Would this be a paper, telephone or online data collection exercise and who would cover the costs of this solicitation? Question 47. How do you think the costs of building and/or operating a UGADD should be covered? We do not think that any third party operator would be willing to invest in the development of this system unless there was scope for them to recover their overhead from the charities, via admin / management costs. Question 48. If charities had to pay to use a UGADD, how can these costs be kept low and transparent, to avoid greater Gift Aid administration costs than is currently the case? The costs would have to be regulated or capped or else the charities would be held to ransom, because the operator would have the monopoly. Question 49. Do you believe that the costs to charities of using a UGADD would be outweighed by the benefits e.g. a higher take-up of Gift Aid? There is no evidence to suggest that the take up would be greater, so we are unable to answer this question. Chapter 5: Assessment of impacts Question 50. In your view, what proportion of relevant donations to charity are made through ‘new’ digital giving channels compared to more traditional forms of giving? We do not count online giving as being part of this evaluation because we receive and manage Gift Aid on these gifts without issue and have done for many years. Our analysis is therefore confined to donations made by text, which currently constitute less than 0.05% of our overall donations, although we expect this figure to grow over time, especially if it is easier to claim Gift Aid on these gifts, since the payment method will be more widely promoted. Question 51.Are these genuinely new donations, or would they otherwise have been made through a different channel? It is hard to say, as we are unable to identify the vast majority of donors giving this way in order to substantiate this analysis. Text donations do not appear to have impacted on volumes elsewhere, so we assume that these are additional.
  • 16. 16 Question 52.What proportion of the donations made through new digital channels is currently Gift Aided? How does this compare with other donations of a similar size? Our figures indicate that just under 30% of donors giving this way go on to complete a Gift Aid declaration, which we believe is reasonably high for the sector. This compares to between 60% for donors giving by cheque / credit card and 85% for donors giving by direct debit. Question 53.Given the size of the donations, what is the maximum proportion of these donations that might practically be Gift Aided? We would hope to see figures of around 50-60% of text donations being Gift Aided through intermediaries, who have better access to the donor data. Question 54.In your view, what effect might the proposals in this document have on the proportion of donations that are Gift Aided, taking into account: a) only donations made through ‘new’ channels; The option for intermediaries to claim on these would have a positive impact on donations made by text, or mobile to mobile payments, where the charity is not automatically privy to the donor’s personal data. b) all donations? We do not believe that the proposals put forward in this consultation would have a positive impact on donations made by other means and we would be concerned that existing systems would be undermined if any of the proposals were adopted. Question 55. In your view, would the proposals in this document have the effect of imposing extra costs on your organisation? How? Would these be start-up costs or ongoing costs? How large would they be? We would expect an intermediary to charge administration costs which we would accept, assuming they were reasonable, if we were able to access revenue that is currently denied to us, as is the case with text donation income. However, the extra costs that would be imposed by a third party managing a UGADD are likely to undermine any perceived benefit. Question 56. Do you agree with the assessment of impacts set out in the summary of impacts table? In your view, are there any impacts that have not been mentioned here? There is no evidence to support the aspiration that the proposals outlined in the consultation will encourage higher levels of charitable donations. We believe that there will be a negative impact on existing arrangements if any one of the proposals is adopted.
  • 17. 17 In summary: 1) Shortening the Gift Aid declaration will ultimately give rise to a two tier system which we fear will be unworkable and our concern is that this will ultimately lead to the abolition of the enduring declaration used now. Charities will also suffer shortfalls if tax is recovered from them directly. Furthermore we believe that any additional information added to the declaration which advises donors that HMRC may share information with the charity in order to effect the repayment, will be off putting and diminish response and will ultimately not address the desired outcome, which is to make the statement significantly shorter! 2) The adoption of a Universal Gift Aid declaration system will we believe seek to supersede existing declarations held by charities, otherwise any claim system would be unworkable and we do not believe that any third party will be as successful as the charities in acquiring replacement Gift Aid Declarations from the existing donor base. There would also be a transitional period as we move from one system to another and it is not clear what the transitional arrangements would be. In conclusion, we would be extremely concerned if any proposal was introduced that undermined the level of income already being claimed successfully by most charities and we would suggest again that an opt out system be considered by the Government, since there is now the technology and we presume the desire to facilitate a match to the HMRC database via the online claim system, in order to evaluate the tax status of donors, thus maximising potential. Such a system would significantly increase the levels of Gift Aid currently being claimed, it would reduce administration costs for charities since there would be no need for them to maintain a declaration, nor would they need to actively solicit them. This finalises our feedback in relation to the consultation. If you have any questions then please contact the author, Jo Georgiou, Head of Fundraising Support Services, e-mail jgeorgio@redcross.org.uk
  • 18. 18 Appendix One This is a cached page from web archives dated 01/10/2012 http://web.archive.org/web/20121001214156/http://www.hmrc.gov.uk/charities/gift_aid/declarations.htm This is the advice now http://www.hmrc.gov.uk/charities/gift_aid/declarations.htm
  • 19. 19 Appendix Two Suggested one off declaration for SMS text donations *EXAMPLE* Explanatory notes The need for the additional reference to Charity Amateur Sports Clubs is negated by the statement that says ‘any other donations I make under Gift Aid’ as this would include both charities and CASCs. Given that the declaration is not enduring, we could simply collect the minimum in relation to address as we do with sponsorship. The act of the donor completing their details and then submitting the form would constitute their consent, negating the need for a tick box.

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