It is common knowledge that Gift Aid has regrettably not been the success hoped for when the new version was introduced in 2000 by the then Chancellor, Gordon Brown MP. The rate of recovery is estimated at less than 30% with some £800 million unclaimed each year.
Because charities can back claim for six years, this means that they are losing out on nearly £5 billion. There is a constant appeal to the government to make the process easier but the reality is that this will take time, and with each year that passes another £800 million is foregone.
This is now complicated by the fact that, with effect from 1 April 2010, the period in which Gift Aid can be claimed reduces from six years to four. It is not sure how much of the lost Gift Aid is due to it simply not being processed, but even if this is only 10%, it means that at a stroke around £160 million will be lost to charities.
Bad as all of this is, what is possibly more distressing aspect is that there seems to be so little awareness of this, both in the charity sector and outside of it. Although I have not carried out detailed research, I have been shocked at how many accountants, lawyers and other financial advisors to charities I have spoken to are completely oblivious of this.
Eric Grounds, director of fundraising at Sue Ryder Care told Third Sector (27 April 2009) that a review carried out when he joined Sue Ryder Care had revealed more than £700,000 in unclaimed Gift Aid, much of it dating back more than four years.
I believe that this is a very disturbing state of affairs, especially since the cut-off date is less than five months away. If charities are going to benefit from these additional funds, then they need to take action immediately.
If a charity feels sufficiently competent they can then undertake this claim themselves. Otherwise they can ask their accountant, tax consultant or other financial advisor to assist with this.
It is not often that there is the opportunity to get free money. It is even less frequent to get it from the Tax Man. With all the brouhaha flying about regarding simplification of Gift Aid regulations, 'opt-out' vs. 'opt-in', confusion over Higher Rate Taxpayer relief and so on, it seems that the best thing charities can do is keep their heads down and simply focus on getting as much of the tax back as possible, before they lose it.
Barry Gower is MD of Gift Aid recovery specialists GAIN. He offers a no charge and no obligation service to analyse charities' data and provide an indication of the Gift Aid they are likely to recover.