Shake-up call as Gift Aid 'stuck in past'

ResPublica called for the system to be reformed so that it applied to donations made by text to ensure it remained relevant in the digital age.

It added that charities should also be able to file their Gift Aid claims online, rather than having to use paper forms that needed to be posted.

The group said the current Gift Aid system, which has remained largely unchanged since it was first introduced in 1990, was too bureaucratic and placed high administrative burdens on both charities and HM Revenue & Customs.

It said processing each Gift Aid claim cost taxpayers 5, while the high administrative costs created a "perverse disincentive" for the Treasury to encourage more donors to use the system.

At the same time, 22.3 per cent of small charities said the time it took them to complete the paperwork associated with Gift Aid was an issue, while 10 per cent thought they had lost money due to its complexity.

The report said: "Gift Aid as both a concept and as a means of boosting the income of charities is a unique and invaluable system.

"But in many ways it remains stuck in its past, operating in much the same way as it always has."

The group said enabling charities to claim Gift Aid online would not only reduce the 5 processing fee associated with the system, but would also enable other digital payments, such as donations made by text to benefit from Gift Aid. It estimates making text donations more

efficient could be worth 15.4m to charities by 2014.

The report, commissioned by the Charities Aid Foundation, also called for a Digital Giving Steering Group, chaired by the Minister for Civil Society, to be set up, to co-ordinate the activities of a new Digital Giving Unit and the Treasury's own Gift Aid team. This group would ensure that in future Gift Aid kept up with innovations in social

media, technology and the way donations can be made.

Many charities have suffered a fall in income as a result of the economic downturn.

Around 16 per cent of charities are struggling to cope with the impact of the recession, while 20 per cent are unable to find funding for additional services.

Phillip Blond, director of ResPublica, said: "Gift aid is vital to so many charities and reform is years overdue.

"We have in our latest report set out a series of recommendations, which if adopted will boost giving and slash costly red tape associated with the current Gift Aid system.

"If Gift Aid is to work, then it must be simple to administer and cost effective. At the moment it is not and charities are losing out on hundreds of millions of pounds."