Charities have been urged by HM Revenue & Customs to introduce a three-stage check for donors registering for Gift Aid, after the taxman found that up to £1m a month is being claimed incorrectly.
Steve Carroll, part of HMRC’s charities outreach team, told delegates at the Charity Tax Group's Annual Tax Conference on Tuesday that three further statements should be agreed by donors to prevent Gift Aid being registered inaccurately.
He said that £1m a month was being wrongly claimed, and some institutions had an error rate of up to 60 per cent.
Charities legally are only required to check donors are UK taxpayers, but Carroll advised charities to put the following confirmation statements on their online donation pages:
- I am donating my own money and the funds have not come from anyone else including family members or from an office or bucket collection
- The money I am donating is not the proceeds from sales of goods or services or the sale of tickets
- I have not received something in return for this donation such as an entry ticket to an event or a raffle ticket
The move follows a dispute between HMRC and JustGiving last year, in which the online donations website was told that a donation signed "Love from Mum & Dad" would not qualify for Gift Aid.
HMRC later moderated its stance on the issue.
Examples Carroll gave of where the single confirmation box had been ticked incorrectly involved fundraisers donating money they had raised from multiple sources without knowing whether each person who had contributed was paying tax.
The department’s research has revealed “for some of the larger institutions, the error rate was getting up to around 50 to 60 per cent because of the amount of fundraising they were using”.
However, he did reassure delegates that HMRC was not looking to retrospectively retrieve Gift Aid from incorrectly registered donations.
New approach 'going too far', says CTG
CTG policy adviser Chris Lane welcomed Carroll’s insistence HMRC would implement a “gradual transition” from the one-line confirmation check.
But he said it was going “too far to insist charities include the new confirmation statements in everything”.
For instance, he said when a donor is trying to set up a direct debit it would be unnecessary for them to have to agree to the above statements as the money is clearly coming only from themselves.
Lane said some fundraisers had concerns the changes could put off potential donors if not enough flexibility is allowed for charities to amend the wording.
More than 40 charities are sitting on CTG’s Gift Aid working group, where discussions between themselves and HMRC are ongoing with regard to the changes’ implementation.
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