Gift Aid changes could be ahead for charities, and are charities using money appropriately?

[D Williams]

Moderator note: Split from

Swanage Railway recruiting a Chief Executive

Or, indeed, the consultants who would no doubt have been involved, with none of the risk of actually running the service. I believe that Swanage Railway hired Rail Business Solutions as consultants to assist in applying for the licence (which of course in the end didnt happen - SRC chose to...

www.railforums.co.uk

I keep hearing rumblings that gift aid regulations will be reviewed in order to limit the number of organisations jumping on the bandwagon.

Whether there is any substance in these I don't know, but it sounds like the sort of thing a cash-strapped government department would do.

 

[Titfield]

I keep hearing rumblings that gift aid regulations will be reviewed in order to limit the number of organisations jumping on the bandwagon. Whether there is any substance in these I don't know but it sounds like the sort of thing a cash-strapped government department would do.

I haven't heard that, but I wouldn't be surprised. Being allowed to claim gift aid on what are effectively fares seems to me to be a most generous interpretation of the rules.

What would stop Andy Burnham putting the Manchester Bee bus network into a charity and claiming gift aid on all bus fares? It would cost the treasury and therefore the taxpayer a fortune. Why stop there, why not make all rail TOCs charities...?

There seems to be a huge number of charities in the UK - 150K plus a further 300,000 social enterprise organisations.

One has to wonder how much taxpayer money goes into these organisations and whether it is all used to genuinely meet charitable objectives and not funding lifestyles of the executives. Sadly, when one reads about the Captain Sir Tom Moore Foundation one does wonder.

 

[RT4038]

What would stop Andy Burnham putting the Manchester Bee bus network into a charity and claiming gift aid on all bus fares? It would cost the treasury and therefore the tax payer a fortune. Why stop there why not make all rail tocs charities.....

I suggest reading https://www.gov.uk/government/publications/what-makes-a-charity-cc4/what-makes-a-charity-cc4#annex-d

A railway preservation society would fall under 'advancement of heritage'. (cue witty comments about the age of buses and trains etc....). There are strict rules on claiming admission fees as gift aid - one of them being that it has to be an annual membership, hence why all these sorts of places now sell 'tickets' on the basis of unlimited visits for a year. Hardly suitable for a public transport operator (which would not get registration in the first place)

There seems to be a huge number of charities in the UK - 150K plus a further 300,000 social enterprise organisations. One has to wonder how much tax payer money goes into these organisations and whether it is all used to genuinely meet charitable objectives and not funding lifestyles of the executives. Sadly when one reads about the Captain Sir Tom Moore Foundation one does wonder.

I suspect there is an element of truth in this - much like if you grant an exemption of IHT to farms then some people will start buying farms with no intention of them farming....... One would hope that the rules for charitable organisations eligibility would be reviewed from time to time to prevent their misuse, as it is a sad human condition to keep trying to get around the rules.

 

[Titfield]

Hardly suitable for a public transport operator (which would not get registration in the first place)

This to me though suggests a form of "having ones cake and eating it" as far as the Swanage Railway is concerned. It is restructuring to get gift aid on the basis that it is "an advancement of heritage" but simultaneously plays the public transport operator on the basis of (a) it takes cars off the road of the Isle of Purbeck (b) the service (admittedly now discontinued) between Swanage and the mainline railhead at Wareham.

 

[RT4038]

This to me though suggests a form of "having ones cake and eating it" as far as the Swanage Railway is concerned. It is restructuring to get gift aid on the basis that it is "an advancement of heritage" but simultaneously plays the public transport operator on the basis of (a) it takes cars off the road of the Isle of Purbeck (b) the service (admittedly now discontinued) between Swanage and the mainline railhead at Wareham.

I don't see these two aims as being conflicting - they are clearly an 'advancement of heritage' in that heritage rolling stock and locomotives are used, for the enjoyment and edification of the general public (both those who remember this type of equipment in normal use, and those who do not). It also, in a wider sense, plays a public transport role in your (a) - relieving road congestion on the Isle of Purbeck by providing a park and ride service to those who wish 'advancement of heritage' and who wish to visit Swanage. A heritage railway in that location is pretty much uniquely able to do this over any other static tourist attraction, but the public transport element is really a mere by product to the advancement of heritage.
The public transport provided by (b) is an economic piffle - it is never going to stand up commercially (i.e. fares collected covering costs of operation) and is only going to be possible with large sums of ongoing public subsidy. Any dreams of enthusiasts trying to force the Swanage Railway to somehow cross subsidise such an expensive operation out of their heritage activity and/or volunteer goodwill is plain nonsense.

Whether 'advancement of heritage' is a worthwhile tax concession will obviously depend on your worldly view. Removing the concession from heritage operations (be it Beamish or the National Trust or a preserved railway somewhere) will inevitably mean fewer and more expensive admission fees. Of course there will be some who would prefer to see such monies used on an expanded welfare budget or something, but I think I prefer riding steam trains....

 

[BingMan]

Why stop there, why not make all rail TOCs charities...?

Because ToCs are registered businesses making profits for their shareholders

 

[35B]

This to me though suggests a form of "having ones cake and eating it" as far as the Swanage Railway is concerned. It is restructuring to get gift aid on the basis that it is "an advancement of heritage" but simultaneously plays the public transport operator on the basis of (a) it takes cars off the road of the Isle of Purbeck (b) the service (admittedly now discontinued) between Swanage and the mainline railhead at Wareham.

The government changed Gift Aid rules something like 15 years ago to provide a means by which charities could recover Gift Aid on admissions. This was a response to various attractions trying to find loopholes in the regulations to benefit from Gift Aid (a classic was allowing a visitor to state that their admission was a donation, at which point the admission was recorded completely differently and fell out of VAT).

Preserved railways are joining the party really quite late. This is for two reasons.

The first is that it's taken a long time to get to grips with the interaction between VAT on travel and Gift Aid on admissions. It's now clear thanks to the work of pioneers in this area that the two regimes are independent of each other, and that a railway can charge a fare as "admission" with Gift Aid benefits, while being covered by the VAT exemption on travel.

The second is that going to a Gift Aid model isn't cost free. Once a site has gone for Gift Aid on admission, it must either charge a premium for the admission to be Gift Aided (as the National Trust does) or allow free readmission for a year on all except 5 normal opening days. As NYMR have found, that affects things like the pricing for galas.

What would stop Andy Burnham putting the Manchester Bee bus network into a charity and claiming gift aid on all bus fares? It would cost the treasury and therefore the taxpayer a fortune. Why stop there, why not make all rail TOCs charities...?

Registering an organisation as a charity is not simple, and the Charity Commission are robust on their interpretation of eligibility, in particular the Public Benefit requirement. Providing a taxpayer funded service to the public for return wouldn't get near the starting line.

There seems to be a huge number of charities in the UK - 150K plus a further 300,000 social enterprise organisations.

One has to wonder how much taxpayer money goes into these organisations and whether it is all used to genuinely meet charitable objectives and not funding lifestyles of the executives. Sadly, when one reads about the Captain Sir Tom Moore Foundation one does wonder.

That is 1 organisation from 450,000 odd.

 

[The Ham]

That is 1 organisation from 450,000 odd.

Indeed, and whilst there could be others, generally charities would find their support dry up rather rapidly if they got found out and so are typically good.

 

[Gloster]

Indeed, and whilst there could be others, generally charities would find their support dry up rather rapidly if they got found out and so are typically good.

But because it is one that had such a high profile and suffered such blatant ‘misinterpretation’ of the rules, it has created a certain amount of distrust of all charities. This distrust has, I am quite sure, spread subconsciously to ones such as preserved railways, however different they are from The Captain Tom Spa and Boot-filling charity.

 

[The Ham]

But because it is one that had such a high profile and suffered such blatant ‘misinterpretation’ of the rules, it has created a certain amount of distrust of all charities. This distrust has, I am quite sure, spread subconsciously to ones such as preserved railways, however different they are from The Captain Tom Spa and Boot-filling charity.

Potentially, however, given how comprehensive the charity commission is on payments to trustees (the trustee has to leave the room when decisions involving them benefiting in some way, they can't vote for it themselves, they have to always act in the interest of the charity, has to declare potential conflicts of interest and the like) a "misinterpretation" excuse appears weak and I suspect that most who have been a trustee of a charity and had anything more than a basic briefing on the rules would likely agree.

 

[35B]

But because it is one that had such a high profile and suffered such blatant ‘misinterpretation’ of the rules, it has created a certain amount of distrust of all charities. This distrust has, I am quite sure, spread subconsciously to ones such as preserved railways, however different they are from The Captain Tom Spa and Boot-filling charity.

I’m not. Cynics will be cynics; charities are in my experience assessed on their own merits.

 

[peteb]

A gift-aid example which might interest forum readers:

A few weeks ago I decided to gift £10 to the National Trust online to plant a tree in someone's memory. I duly ticked the gift aid box, hoping that the charity would benefit from clawing back some income tax I'd paid.

Imagine my surprise this week when I received a letter through the post thanking me for my donation on which the Trust was able to claim back £1.25p

I say surprise because, if it costs 85p to send a second class letter and a few pence to print it and put in an envelope, the National Trust has already spent 60% of the gift aid benefit merely thanking me for my donation.

I shan't be signing gift aid for a small one-off donation in future.

By the way, I am NOT a member of the National Trust.

 

[35B]

A gift-aid example which might interest forum readers:

A few weeks ago I decided to gift £10 to the National Trust online to plant a tree in someone's memory. I duly ticked the gift aid box, hoping that the charity would benefit from clawing back some income tax I'd paid.

Imagine my surprise this week when I received a letter through the post thanking me for my donation on which the Trust was able to claim back £1.25p

I say surprise because, if it costs 85p to send a second class letter and a few pence to print it and put in an envelope, the National Trust has already spent 60% of the gift aid benefit merely thanking me for my donation.

I shan't be signing gift aid for a small one-off donation in future.

By the way, I am NOT a member of the National Trust.

The other side of that is that it's generally true that organisations earn more income where they acknowledge and thank their donors. I also suspect the NT are paying a lot less than 85p/stamp, and have contracts in place for mailings that reduce the cost per page a lot too.

As someone who administers Gift Aid, I'd absolutely encourage people to Gift Aid where they are already giving.

 

[sprunt]

Given the chance I'd abolish Gift Aid. If you want to donate to charity, fine, but I don't see why that should impose an obligation on everyone else to chip in too.

 

[gswindale]

Given the chance I'd abolish Gift Aid. If you want to donate to charity, fine, but I don't see why that should impose an obligation on everyone else to chip in too.

It's not an obligation though is it?

I'm sure we visited somewhere relatively recently where we were asked if we wanted to "Gift-Aid" our admission or not.

 

[jon81uk]

Given the chance I'd abolish Gift Aid. If you want to donate to charity, fine, but I don't see why that should impose an obligation on everyone else to chip in too.

It isn't everyone else chipping in? It is the income tax the donor would have paid on that sum being passed to the charity.

 

[35B]

Given the chance I'd abolish Gift Aid. If you want to donate to charity, fine, but I don't see why that should impose an obligation on everyone else to chip in too.

There are two answers to that:
1. Gift Aid is the transfer of tax I pay to charities I donate to
2. Gift Aid was introduced to boost charitable giving because, in the round, it saves tax money compared to direct government funding.

 

[oldman]

There are two answers to that:
1. Gift Aid is the transfer of tax I pay to charities I donate to
2. Gift Aid was introduced to boost charitable giving because, in the round, it saves tax money compared to direct government funding.

And there are some questions to that:
1 Why should I be able to opt out of contributing to public services because I prefer to give to a charity which may not be replacing government funding?
2 Does it actually boost charitable giving? Do people give more because of Giftaid?
and
3 Why should donors in higher-rate tax bands get tax-relief - nearly £700 million a year? Do rich people only give to charity if they get a tax break?

 

[Yorkshire09876]

The other side of that is that it's generally true that organisations earn more income where they acknowledge and thank their donors. I also suspect the NT are paying a lot less than 85p/stamp, and have contracts in place for mailings that reduce the cost per page a lot too.

As someone who administers Gift Aid, I'd absolutely encourage people to Gift Aid where they are already giving.

I think it depends on the method of donation and the amount. If they give online, then sending a thankyou by email doesn't cost you anything, so no reason not to. However, if it involves printing and posting a thankyou letter then a minimum threshold is sensible, which will depend on the size of the charity. For a medium-sized charity, say 50 quid as the boundary, and write to thank anyone who gives more than that (if they don't have an email address). For large sums, a personalised letter is more appropriate.

 

[The Ham]

Why should donors in higher-rate tax bands get tax-relief - nearly £700 million a year? Do rich people only give to charity if they get a tax break?

Again the point is that by giving £1 and the charity getting 25p the individual then gets (IIRC) 25p back.

I don't know if many people willing to pay £1 to not pay 25p in tax.

£700 million from 25p a time means that they've given £2.8bn.

 

[styles]

I keep hearing rumblings that gift aid regulations will be reviewed in order to limit the number of organisations jumping on the bandwagon.

I've heard them for years mate.

I manage the finances for some charities. I'm also a big advocate for volunteers who use their own petrol/printing/etc logging what they spent even if they don't claim it, as we can claim it as a donation and obtain Gift Aid on it.

I am yet to see said Gift Aid regulation tightenings materialise.

Not saying it won't happen, but I wouldn't put money on it in the next year or so.

 

[brad465]

Given the chance I'd abolish Gift Aid. If you want to donate to charity, fine, but I don't see why that should impose an obligation on everyone else to chip in too.

Or even better, if successive governments did their jobs properly, charities wouldn't be necessary. As Henning Wehn once said: "We don't do charity in Germany, we pay taxes. Charity is a failure of government's responsibilities." How true this is in Germany today is debatable, but the general principle stands.

 

[johntea]

I just wish they would stop with the rather annoying charity chuggers that I have to bypass several times every time I pop into town!

 

[Lloyds siding]

Or even better, if successive governments did their jobs properly, charities wouldn't be necessary. As Henning Wehn once said: "We don't do charity in Germany, we pay taxes. Charity is a failure of government's responsibilities." How true this is in Germany today is debatable, but the general principle stands.

Many charities have been founded to change government legislation, notably the ant-slavery movement and the RSPB. Charities do often fill the gaps left by government policy, and this would apply to the heritage railways which mostly run on lines closed by government decisions.
Henning's attitude in Germany is commonplace, but there are many charities in Germany. Indeed I met a German millionaire who set up a charity to admister his pet project ( to recognise the unrecognised who were making a difference to the environmental future of the planet), admittedly he set it up based in Sweden, but this was to make a philosophical and political point.

 

[oldman]

As Henning Wehn once said: "We don't do charity in Germany, we pay taxes. Charity is a failure of government's responsibilities."

Wehn says what his target audience wants to hear. There are many charities in Germany, notably the long-established church-based Caritas (Catholic) and Diakonie (Protestant). You can even get tax relief on charitable donations.

 

[Starmill]

When I donate online to things for which I receive nothing tangible in return I choose the gift aid option. This seems fair to me.

 

[OuterDistant]

I just wish they would stop with the rather annoying charity chuggers that I have to bypass several times every time I pop into town!

Wait, this is still a thing? If it is, I reckon they're secretly paid by Amazon to drive people further towards shopping online.

 

[SuspectUsual]

Wehn says what his target audience wants to hear. There are many charities in Germany, notably the long-established church-based Caritas (Catholic) and Diakonie (Protestant). You can even get tax relief on charitable donations.

I think his is a comedic simplification but there’s a valid point behind it. Charities should exist for non-essential stuff - so heritage railways would be a good example. At the other extreme stuff like the air ambulances shouldn’t have to be charities

 

[oldman]

I think his is a comedic simplification but there’s a valid point behind it. Charities should exist for non-essential stuff - so heritage railways would be a good example. At the other extreme stuff like the air ambulances shouldn’t have to be charities

I was really having a pop at Wehn who I personally find quite smug. But in the real world, including Germany, there will never be enough money for everything. A lot of money goes to medical research charities - is that 'essential', and what is the correct amount to spend?

In Scotland there is a state-funded air ambulance, because of the large remote areas, but also a charity service. If the latter didn't exist, would the funding be found to augment the state provision?

 

[BingMan]

Or even better, if successive governments did their jobs properly, charities wouldn't be necessary. A

No. Charities allow people to determine where their money is spent. Taxes don't.

If, for instance, the RSPCA was funded by taxation I would be contributing to an organisation of which I thoroughly disapprove.