The end of Gift Aid

Simon Preston
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Re: The end of Gift Aid

Post by Simon Preston »

I’m curious whether this has been triggered by HMRC chasing up charities or the new CEO spotting the anomaly before HMRC did. The previous CEO wrote an item in the magazine a year or so back claiming that when CUK was compared with other charities it provided a higher return of its contributions to members as benefits. So ought to have been aware of this issue coming.

Members who are higher rate tax payers could previously claim 20% of their subscription back through Self Assessment, giving them membership for £34.80. Given the abolition of the reduced subscription for retired members, we would otherwise have been heading for the bizarre situation where members with high incomes would have been paying a lower membership fee than retired members living on a state pension.
Oldjohnw
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Re: The end of Gift Aid

Post by Oldjohnw »

Tax relief is one of the great 'inequalisers'. The more you have the more you get.

This was observed way back in biblical times and probably long before:

"To every one who has will more be given, and he will have abundance; but from him who has not, even what he has will be taken away". — St Matthew 25:29
John
drossall
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Re: The end of Gift Aid

Post by drossall »

Gift Aid is not really tax relief though? It's an inducement to give to charity because the donation will be worth even more? The giver does not benefit, unless choosing to calculate that, "I can give less because Gift Aid will make up the gap", and that's not the idea at all, nor is there evidence that I've heard of that that happens extensively.
PH
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Re: The end of Gift Aid

Post by PH »

drossall wrote:Gift Aid is not really tax relief though?

As Simon says it can be for higher rate tax payers. The Charity gets the 20% Gift Aid and the taxpayer can claim back the difference between that and the rate they've paid.
drossall
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Re: The end of Gift Aid

Post by drossall »

Never knew that. Can't think of an argument for it, really.
AndyK
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Re: The end of Gift Aid

Post by AndyK »

Simon Preston wrote:I’m curious whether this has been triggered by HMRC chasing up charities or the new CEO spotting the anomaly before HMRC did. The previous CEO wrote an item in the magazine a year or so back claiming that when CUK was compared with other charities it provided a higher return of its contributions to members as benefits. So ought to have been aware of this issue coming.

Neither, is the answer. I've just finished three years as a CUK trustee and more specifically as a member of the audit committee, and Gift Aid has been a recurring matter of debate and review throughout that time.

CUK has been keeping close tabs on the value of membership benefits or some time. The problem is that gradually, slowly, we've been edging towards that Gift Aid limit. Because the third-party insurance is such a significant part of the package, the volatility of the insurance market has a big impact. (Remember that the benefit's value is assessed as what it would cost on the open market, not what CUK pays for it.) It was getting towards the point where, even if we didn't change the benefits at all, a spike in general insurance rates might push us over the edge.

If there was a tipping point, it was the recent membership review (the one that led to the removal of the senior rate amongst other things). Besides looking at membership rates, this looked at membership benefits and what we could offer within the rules. The conclusion was that it was simply becoming too risky to rely on staying under the Gift Aid limit. The only way to be sure of getting continued Gift Aid would be to significantly reduce member benefits, and nobody wanted to do that. It would be better to have the flexibility to add new benefits without being constantly worried about whether this benefit or that would be a step too far.

It is sad that it's come to this, but it was a logical decision by CUK and was the result of a long period of monitoring and discussion, both by the senior management and the board. It didn't come out of nowhere. I know because I was there.

In my personal view* Gift Aid in general is an utter mess. It's a disgrace. It's developed into a vast litany of arcane, sometimes self-contradictory rules, many of them reinterpreted at will by HMRC, causing substantial admin costs, uncertainty and frustration for charities throughout the land. It should be done away with and replaced by something simpler and more logical. What annoys me most is that a few years ago there was a consultation on whether Gift Aid should be changed or replaced by something else. The big charities (and I mean the BIG ones, the likes of Oxfam) wimped out and basically said "no, it's all fine, carry on." They knew it was a bureaucratic nightmare, but I suspect they were afraid it would be taken away and replaced with, well, nothing.

And I've just realised that I pointed out some of these issues in the charity conversion debate in this very forum way back in 2010.

* I am no longer a trustee and do not speak for Cycling UK!
Jdsk
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Re: The end of Gift Aid

Post by Jdsk »

AndyK wrote:It is sad that it's come to this, but it was a logical decision by CUK and was the result of a long period of monitoring and discussion, both by the senior management and the board. It didn't come out of nowhere. I know because I was there.

Thankyou

Jonathan
thirdcrank
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Re: The end of Gift Aid

Post by thirdcrank »

The real disgrace is that mentioned by Oldjohnw above.

The concept of charity has been twisted over centuries into a system of tax avoidance. ie Relief from poverty, disease and ignorance have been distorted to a system of reinforcing privilege.

I misunderstood the reason for this thread, but I do remember the tone of the personal messages in favour of the conversion from the ctc chair at the time and the entire drift was that charity status was a no-brainer because of the tax advantages, of which Gift Aid was one.

Any tightening up by the HMRC / Charities Commission is long overdue, way beyond CUk
Mike Sales
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Re: The end of Gift Aid

Post by Mike Sales »

thirdcrank wrote:
Any tightening up by the HMRC / Charities Commission is long overdue, way beyond CUk


What we call, in our quaint British way, Public Schools, are charities!
It's the same the whole world over
It's the poor what gets the blame
It's the rich what gets the pleasure
Isn't it a blooming shame?
Syd
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Re: The end of Gift Aid

Post by Syd »

PH wrote:
drossall wrote:Gift Aid is not really tax relief though?

As Simon says it can be for higher rate tax payers. The Charity gets the 20% Gift Aid and the taxpayer can claim back the difference between that and the rate they've paid.

I was told by my accountant back in the early 2000’s to donate £x,000 to a charity of my choice and get a receipt to give her. I’m no expert in the matter but it seems that simple act saved me way more than it cost.
PH
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Re: The end of Gift Aid

Post by PH »

AndyK wrote:Neither, is the answer. I've just finished three years as a CUK trustee and more specifically as a member of the audit committee, and Gift Aid has been a recurring matter of debate and review throughout that time.

Under review pretty much from the time it was granted then. It's hard to see how this couldn't have been predicted and if it was then it's hard not to conclude that the membership were, at the very least, misled.
Have you some idea of the impact of losing it? It was said to be such a huge benefit, one would assume it will also be a huge loss.
AndyK
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Re: The end of Gift Aid

Post by AndyK »

thirdcrank wrote:Any tightening up by the HMRC / Charities Commission is long overdue, way beyond CUk

I don't want to harp on about it but HMRC are always tightening up on it, usually by introducing new and largely irrational edicts that change the rules of the game while charities are trying to play it. It's a stupid game that wastes everyone's time and money. The Charity Commission wisely keeps its distance, I think. It decides who gets to be a charity, but it doesn't decide whether they get Gift Aid or not. That's not its job.
AndyK
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Re: The end of Gift Aid

Post by AndyK »

PH wrote:
AndyK wrote:Neither, is the answer. I've just finished three years as a CUK trustee and more specifically as a member of the audit committee, and Gift Aid has been a recurring matter of debate and review throughout that time.

Under review pretty much from the time it was granted then. It's hard to see how this couldn't have been predicted and if it was then it's hard not to conclude that the membership were, at the very least, misled.
Have you some idea of the impact of losing it? It was said to be such a huge benefit, one would assume it will also be a huge loss.

From before the time it was granted. It took a long period of negotiation with HMRC to settle exactly what could be claimed and what couldn't. (After the basis was agreed it could be claimed retrospectively, so the income was delayed but not lost.)

I would say that many of the assertions made about Gift Aid at the time of the charity conversion vote were naive, to put it mildly. I include in that some things said by some of the CTC Councillors of the time, who really should have done their homework better. Gift Aid should never be seen as the reason to become a charity: it is, at best, a nice bonus that comes as a side effect.

Well... not all membership types qualified for Gift Aid (nothing from affiliate members); not all full members qualified for Gift Aid; of those that did, many had not signed the forms to gift-aid their subs. So the impact is not as big as it could be, but it'll be big enough to notice in the accounts. The charity's business plans have already been adjusted to allow for that - as they have, of course, for the losses in income due to Covid-19. However the intention is that an improved membership offering and recruitment will more than make up that drop over the next few years. There are, of course, other factors at play for membership income, like how many Senior members choose to renew at the full rate as their membership comes up for renewal.
Psamathe
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Re: The end of Gift Aid

Post by Psamathe »

(I've not been a member for ages so just expressing a personal observation)
One assumes that CUK needs money (they are still wanting donations) and that more money means more campaigning and better outcomes for cyclists, I'm surprised that options to reduce the value to members without affecting the services to members has not been explored more (maybe it has?).

For example, printing and posting a magazine must cost a bit and I assume counts towards membership "value". But why not make it downloadable with an option to request a printed version (that is what my Astronomy Society did). Members still get the magazine in a format suitable to them (and "greener" for many) yet costs and average "value" reduced.

For example, why not make 3rd arty insurance cover a free option. Many get it anyway with their household insurance (and being covered twice can complicate claims anyway). Fewer members needing/taking it reduces costs (maybe) and reduces average "value" of membership.

I don't know what other benefits there are but maybe most members don't make use of them so making them free options could help further.

Many will both reduce costs (e.g. magazine) and possible return benefits to a level where Gift Aid might be allowed.

Ian
PH
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Re: The end of Gift Aid

Post by PH »

AndyK wrote:<Snip>

Thanks for the detail.
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