George Bull

Written by: George Bull

George Bull

Senior Tax Partner

Don't use charity scandals as an excuse to cut gift aid

The UK has a long and honourable history of using the tax system to encourage philanthropy. Gift aid is only part of this and has been the policy of governments of all persuasions for almost 30 years. Before that the deed of covenant system was used.

Recent disclosures about Oxfam and other organisations (both charitable and non-charitable) reveal behaviours which are wholly reprehensible but the real scandal is the failure of governance and safeguarding, not a problem with the UK’s gift aid system. 

The inexcusable conduct of certain individuals should not be used as an excuse to curtail gift aid on charitable donations, or to restrict the UK’s pledge to spend 0.7 per cent of national income a year on foreign aid.

Clearly more work is required to improve the regulation of charities but at least five regulators must be engaged with. In addition to the well-known Charity Commission for England and Wales, there are the Office of the Scottish Charity Regulator, the Charity Commission for Northern Ireland, the Financial Conduct Authority and the Department for Education. All of these must contribute to a single solution which eliminates the scope for abuse without preventing relief from reaching people in need. In the course of this, it is inevitable that charities’ back-office costs must increase. Indeed, it is arguable that the pressure to cut costs has contributed to the current mess. 

The majority of charities are small and deal with local issues. Absorbing these into some national super-charity, or having the government take over their functions, would simply increase costs to the point where the service they provide was not viable. This would leave their beneficiaries exposed. 

It is disingenuous to suggest that gift aid gives the wealthy more sway. The Office for National Statistics publishes annual figures for the value of charity tax reliefs which suggest that at least 60 per cent of the gift aid received by charities is a result of donations from basic-rate tax payers. The total cost of gift aid tax reliefs in 2016-17 was £1.8bn which represents around 0.23 per cent of UK public spending for the same period. A small price to pay for all the good it achieves. And, it should be noted, not much more than the annual cost to the NHS of missed appointments.

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