Charity finance experts say that government reforms to Gift Aid rules could “future proof” the system and safeguard donations worth billions of pounds a year.
The Charity Tax Group welcomed a government announcement to engage with charities as part of its ongoing review of the current Gift Aid system.
CTG said that the Treasury would use the engagement to look at how easily it can digitise and simplify the Gift Aid process.
The CTG and other experts have long called on the Treasury to upgrade the Gift Aid system, through which charities can claim extra money by claiming the tax already paid by donors as well as their donation.
Gift Aid is worth more than £1bn to charities each year but finance experts say that reforms to make the process easier for donors to use could release hundreds of millions of pounds more annually.
A series of Treasury tax proposals published yesterday include: “The government will continue to engage with the charities sector to improve the way that Gift Aid works in order to minimise administrative burdens through the use of digital technology.”
Richard Bray, chair of the CTG, said: “The Future of Gift Aid project, spearheaded by CTG, has broad support and involvement from a wide range of stakeholders including HMRC.
“At a time when charities face pressure on donations this is an important forward-looking step to future-proof Gift Aid.”
The Treasury also said that it would be consulting on charity tax compliance rules over the next 12 weeks, in a bid to “tackle the small group of charities” benefitting from tax breaks to which they are not entitled.
This will include looking at ways to prevent ineligible donors from gaining financial benefits from their donations as well as acting on abuse of charitable investment rules and “sanctioning charities that do not meet their filing and payment obligations”.
Bray said: “CTG will work with members and HMRC during the consultation process to ensure that any proposed changes are targeted and proportionate and do not create any unintended consequences for the vast majority of law-abiding charities.”