As I begin to drown under increasing numbers of requests in the mail asking me to include in my will, specific legacies for the charity sending (and then tell the charity about it for their records?) plus not far behind those letters from charities asking me to change from annual payments to monthly in helping them manage their cash flow (!!), I read an interesting comment on the Charities Aid Foundation (CAF) website:
“Currently, only one third of all giving is tax efficient. HM Revenue & Customs reports that in 2006/07, £830 million in reclaimed tax was passed on to charities. CAF estimates that a further one third of donations could easily be converted to tax-efficient methods generating over £600 million in extra income for charities.”
It would seem that this difference is simply down to large numbers of individual donors not making donations under gift aid, so charities can then reclaim basic rate tax on the value of the gift at no additional cost to the donor. I have always thought most charities sadly seem to treat this whole area as an after thought given how they invariably leave it as a footnote to the donor’s form. If the CAF figures are right then instead of chasing for future legacies would charities not be better off spending their time and effort chasing that “low hanging fruit” of current tax refunds?
How? Simply by data mining their donor databases (refer my earlier blog observations on many charities being poor in this area) and identify those gifts (either regular gifts or appropriate value of larger one off donations) received without a tax refund being obtained. Then, instead of their usual standard letter approach, the charities could easily follow up with an appropriate tailored short letter explaining with specific figures for the donor’s amounts what the benefits would be and asking for the form to be signed and sent back if they were taxpayers when the gifts were made.
Given the possibility of retrospective claims for several prior years under gift aid by charities, one cannot help but feel there is a lot of money waiting to be collected off the taxman by UK charities. Also, this would provide “cash in the bank” and one hopes a better boost to charities cash flows!!