July 25, 2019

The Future of Gift Aid Roundtable

Gift Aid is one of the biggest enigmas in the charity sector. Many donors don’t know how it works or how it benefits charities. Some have likely never even heard of it.  

As a result of Gift Aid being misunderstood or neglected, HMRC estimates that a total of £580 million every year is lost in unclaimed Gift Aid (a whopping one third of eligible donations), with another £179 million being claimed in error. This is an immense blow to the charity sector’s overall income, which means fewer homeless can be helped to their feet, fewer kids from disadvantaged areas can be given a chance and efforts to fight disease aren’t being funded to the fullest 

We decided to bring together the most knowledgeable industry leaders, including HMRC and eminent charity tax experts to see how we can tackle this massive inefficiency head on. Chaired by GoodBox advisory board member, the incredible Bernie Hollywood OBE, it was an insightful afternoon full of discussion. Let’s have a closer look at some of the key takeaways from the event.  

Pulling Back The Curtain 

What is Gift Aid 

Gift Aid is a government run scheme whereby charities can claim back the income tax you have already paid on the money you use to donate, as long as you’re a UK tax payer. Therefore, by Gift Aiding a donation, charities receive an extra 25% from HMRC with no extra cost to the donor. A £4 donation suddenly becomes £5. It gets a little trickier when you consider other tax brackets. If you’d like to dive a little deeper, we’ve written a whole article explaining it which you can find here.  

Why is it important? 

Gift Aid is massively important to charities as it unlocks a whole new stream of revenue for them. The boost in income they receive means they’re able to multiply the impact they have on the causes they support.

So, if Gift Aid is basically free money then why does so much of it go unclaimed or claimed incorrectly?  


The first step in tackling the issue is education. Our host of attendees agreed that the rules and processes around Gift Aid are confusing. When asked to describe it in one word we heard things like “tricky, bewildering, complicated, misunderstood”. It is clear that better education materials are required for a wide audience, from fundraisers interacting with the public to the trustees of small charities. 

Thankfully some of the larger charities as well as the Institute of Fundraising offer Gift Aid Awareness Training and Gift Aid advisory packs, but the problem is still pervasive. A recent report by HMRC identified that 5% of those not eligible for Gift Aid reported ‘always’ adding Gift Aid to their donations, and 18% of those who are eligible ‘never’ added it. A screening questionnaire was suggested here to limit the amount of incorrectly claimed Gift Aid but was met with the issue of discouraging donors by adding another hoop to jump through. 

Charities themselves must be aware of the rules and consult HMRC to ensure they are compliant, especially when coming up with new ways to fundraise which may not be eligible for Gift Aid. This helps lessen the friction, unnecessary use of resources and incorrect claims coming through to HMRC.  

Finally, donors need to be made aware of what exactly Gift Aid is, how it benefits charities and that they incur no extra cost by Gift Aiding their donation.  

The Current Process 

Gift Aid was introduced in the Finance Act 1990. While there have been some changes made to it since, the pace of innovation and change in the way we pay and donate has massively outpaced it. We’re still using a system created when “Ice Ice Baby” had just hit the air waves, and kids were going googly-eyed over the very first Game Boy console. As a result, charities find themselves caught between innovation and the past. The system was built in an analogue time, but we live in a world of digital payments now, and it needs a revamp.  

Suggested updates discussed included an Opt-Out System whereby donors can choose to opt-out of Gift Aiding their donation instead of the current system where they choose to opt-in. Another was the creation of a Universal Gift Aid Declaration Database which would streamline the process to just one, enduring sign up. Until these processes are updated however, it’s up to us to work together and ensure we can create systems that work for donors and empower charities 

To Gift Aid or not to Gift Aid…

In order to be eligible to apply Gift Aid to your donations, you must first be a UK taxpayer paying either Income Tax or Capital Gains Tax. But even if you are a UK taxpayer and eligible to apply Gift Aid, the rules for which type of donation you can apply it to can trip donors up. So what’s eligible and what isn’t? Gift Aid can only be applied to a gift of money from an individual UK taxpayer who receives nothing in return for their donation. This automatically excludes bake sales for example, as the ‘donor’ receives a cake in return for their donation. This also excludes donations made by a company. Situations whereby a ‘minimum donation’ is required for entry to an event are also excluded as this is technically considered payment.

A clear audit trail is needed in order for Gift Aid to be applied. For instance, if you personally donate yourself, it can be Gift Aided. But if you donate on behalf of a friend or family member, it can’t be Gift Aided as there’s a missing link in the audit trail between you and the original donor.

How Can Contactless Donations Fit In?

So, where do contactless donations fit into a system built nearly two decades before contactless cards were even launched? Gift Aiding your contactless donation is possible through companies like Swift Aid but in order to make it widely adopted, another link in the chain is needed which can help identify the donor’s generous tap as a donation and not a payment in return for goods or services.

Roundtables like this are vital in giving us the insights we need to address the issues experienced by charities, HMRC and donors alike. If we are to succeed in innovating on behalf of the charity sector, we must listen to the feedback of all stakeholders and address each of them. 

We took away valuable insights and key points to address moving forward (as well as enough left over sandwiches to feed the whole office!). Thank you to everyone who attended and gave their opinions, thoughts and ideas around the future of Gift Aid and how we can help to improve it, and a special thank you to our Chair for the afternoon, the inimitable Bernie Hollywood.

At GoodBox, we thrive on working closely with charities to understand and overcome the challenges they face. If you are keen to join future conversations and events, please get in touch with us at outreach@goodbox.com. 

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