April 2014

Joe Saxton and Sarah Eberhardt

A short briefing on corporate gift
aid
2

Contents

Section 1: Executive summary
Section 2: Introduction
Section 3: Why was Corporate Gift Aid changed in 2000?
Section 4: What can HMRC tell us about the effectiveness of these reforms?
Section 5: What can we learn from other data about corporate giving trends?
Section 6: Conclusions
Section 7: Bibliography
3

Section 1
Executive summary
Corporate gift aid was reformed in 2000
Corporate Gift Aid was reformed in the year 2000 to provide a tax benefit for the
company making the donation. Prior to this, charities had been able to reclaim Gift
Aid on donations made by companies.

The change had to deliver 25% more corporate donations to stand still
It is important first to consider the implications of the reform for charities. The value
of Gift Aid means that for charities to have been unaffected by the changes to
Corporate Gift Aid, following the change in 2000 companies would need to have
increased their donations by 25% (even though this would not reflect the actual
cost to them). However, if the changes were now reversed, so that charities once
again received Gift Aid on corporate donations, companies would be able to donate
20% less than they had been doing (since 2000) without charities seeing a dip in
the current levels that they receive.

The motives behind the 2000 change
To understand how effective the change to Corporate Gift Aid has been, it is worth
seeking to understand what it was intended to achieve. This reveals a certain
degree of mixed messages. HMRC have suggested that the change was made to
simplify the system and reduce the administrative burden, particularly for charities
with trading subsidiaries (such as charity shops) which donate their profits as a
Corporate Gift Aid donation. It was hoped that allowing companies to reclaim the
tax would incentivise companies to give more in order to prevent these changes
bringing about loss. On the other hand, others have suggested that the change was
intended primarily to bring about an increase in donations from companies.

Calls for changes to be reversed
The Institute of Fundraising, amongst others, has called on the Government for a
reversal of this reform so that charities can once again benefit from tax relief on
corporate donations. However, this campaign has met with a significant hurdle in
the shape of a lack of robust data demonstrating the effectiveness, or otherwise, of
the original reform.

Lack of robust data hampers assessments of impact of change
HMRC has recently received considerable criticism from the National Audit Office
and the House of Commons Committee of Public Accounts over its failure (despite
its promises prior to the reforms) to establish a framework, or to collect data, by
which the effectiveness of the reforms could be fully evaluated. There is a particular
lack of data relating to the Corporate Gift Aid reforms since the changes mean that
companies no longer had to account for how much they are paying to charities in
their annual corporation tax return to HMRC.

4

The Public Accounts Committee suggested that the changes do not adequately
simplify the tax rules for reliefs on donations, and that further simplification was
needed to both reduce abuse and make the system easier and simpler for charities
to claim the reliefs (2014, 5). Whilst it is unclear what difference the simplifications
have made to charities (a potential subject for further research), it seems
questionable whether any such advantages would outweigh an apparent loss in
income resulting from the reform.

What seem to be the changes in corporate giving since 2000
The limited evidence available both from HMRC and elsewhere suggests that it is
highly unlikely that companies have increased their giving by over 25% since the
reforms, meaning that charities have incurred a loss as a result of the changes.
Prior to the reforms, HMRC data shows a positive picture of corporate giving
increasing each year (by 74% on average in real terms) from the time that Gift Aid
was introduced up until the changes were made. In 2005 HMRC found some
‘evidence to suggest that changes relating to companies may have had a negative
effect on charities’ incomes and that companies did not alter their donations in
response to the changes in tax relief’. According to NCVO figures private sector
income has barely risen between 2000 and 2011, whilst CAF and DSC research
indicates evidence of some decline in corporate giving since 2000.

Concerns about reversing the system
There is some concern about the effect of returning Corporate Gift Aid to charities,
and the possibility that doing so might prompt companies to reduce their giving.
Since enabling companies to claim Gift Aid on donations does not seem to have
substantially increased their propensity to give, it could be argued that companies
should not therefore be too concerned about the removal of this tax relief. On the
other hand, reflecting a pessimistic view of company giving (particularly if we accept
research suggesting a decline in corporate giving following the changes in 2000), it
could be feared that taking this tax relief away from companies will offer them an
excuse to reduce their giving.

Importantly though, if the changes were reversed, companies could donate 20%
less than currently without charities seeing a dip in what they currently receive.
Bearing this in mind, the potential benefits to charities seem greater than the risk
that companies might decrease their donations by more than this figure.

Reversing the 2000 changes could generate an extra £233 million a year
in gift aid
According to the NCVO Almanac 2014, £0.933bn was given in corporate donations
and gifts in kind in 2011/12. So if charities had been able to claim Gift Aid on this,
as previously, they would have gained an additional £0.233bn or £233 million – and
received a total of £1.17bn in corporate donations, gift aid and gifts in kind.

5

Section 2
Introduction
Corporate Gift Aid since 2000

In 2000, Corporate Gift Aid was reformed to provide a tax benefit for the company
making the donation, rather than the charity receiving the donation. Prior to 2000,
charities had been able to reclaim Gift Aid on donations made by companies,
whereas after this change the donation reduces the company’s tax liability by the
rate at which it pays corporation tax. Companies pay corporation tax at different
rates depending on their size, whether they have ring fence profits and/or
associated companies.

Corporate Gift Aid now works as follows (NAO 2013):



Where does a £100 donation to charity made by a
company go?

Prior to the changes in 2000, if a company gave £100 to a charity, this would be
worth £125 in total to the charity. The £100 was treated as 80% of the donation,
and the charity would receive an additional £25 in tax refund. Since the changes, a
£100 donation made by a company is worth £100 to charities, but costs the
company significantly less than this. For instance, for a company paying corporate
tax at 20%, a £100 donation would effectively cost that company only £80.



6

Before 2000 After 2000







To understand what difference the changes might have made to charities in 2000, it
is helpful to consider what changes a company would need to have made to its
donations after 2000 in order for a charity to continue to receive £125 (as it would
from a £100 donation prior to the initial change in 2000).

For a charity to receive £125...



After the change to Corporate Gift Aid in 2000, for a charity to continue to receive
the same value of corporate donations, companies would have needed to increase
their donations by 25%, although the cost to them would be similar to before
depending on their rate of corporation tax (for instance the cost would be the same
if they paid corporate tax at 20%). If companies did not adjust their giving to reflect
this change immediately after it, this would likely be a one-off permanent reduction

Before 2000
• A company must donate £100

After 2000
• A company must donate £125, but it would effectively cost the
company £100 (if it pays tax at 20%)
• Therefore: a company must donate 25% more than before the
changes in 2000 (but at a similar cost, depending on its tax rate)

If there was
a return to
pre 2000
rules
• A company can return to donating £100
• Therefore: a company can donate 20% less than had been the
case since 2000
Company donates £100


Cost to company £100
Company donates £100
and receives £20 tax
relief (if it pays tax at 20%)

Cost to company £80
Charity receives £100
donation and can reclaim
£25 in Gift Aid

Charity receives £125

Cost to company £100
Charity receives £100



Charity receives £100

7

in their giving, as it seems probable that companies would be unlikely to remember
for long that the system has been otherwise, so the opportunity to account for the
change would quickly be lost. By 2002 it is likely that company charity giving was
already rebased to whatever they gave in 2001.

It should also be made clear that corporation tax has a number of different tax
rates. In 2014, There is the small profits rate of 20%. There is the main corporation
tax rate of 21% and there are special rates for unit trusts and various other
corporations. From 1
st
April 2015 there will be a single tax rate of 20% unifying the
small profits rate and the main corporation tax rate. It is this tax rate of 20% we
have used in our calculations.

It is worth pointing out that the main corporation tax rate
1
has reduced greatly in
recent years. In 2000 the main rate was 30% and some rates were as high as
32.5%. This means the loss to the sector from the change in corporate gift aid was
much higher in the early days of the change when corporation tax rates were
higher. So while a corporation rate tax of 20% produces a potential corporation gift
aid rate of 25% (20% tax over the 80% remaining) when the main corporation tax
rate was 30% the gift aid benefit would have been nearly 43% (30% tax over the
70% remaining). The marginal rates would have made gift aid even higher. In
retrospective it is amazing that the charity sector made so little fuss about the
change.

In retrospect it would also be a highly unrealistic expectation that companies would
should adjust their donations in order to compensate for the changing amount of
tax they can reclaim through Gift Aid. In many cases a company doesn’t know how
much profit/tax rate/tax relief it will get until perhaps 9 to 21 months after the
donation has been made when the accounts are prepared and corporation tax
calculated. It seems unlikely that decisions made about the amount to be donated
would take into consideration the exact level of related corporation tax relief.

On the other hand, what would be the effect if the changes made in 2000 were to
be reversed, so that charities once again received Gift Aid on corporate donations?
In this case, companies would be able to donate 20% less than they had been
doing without charities seeing a dip in the current levels that they receive.




1
Our thanks to Margaret Thornton of Morgan Cameron Accountants for help with
understanding corporation tax rates and the workings of reclaiming gift aid. Any remaining
errors are we are sure are entirely our fault.
8

Section 3
Why was Corporate Gift Aid changed?
The changes to Corporate Gift Aid were part of wider changes to charitable tax
reliefs made at the time, which were intended ‘to broaden access to tax reliefs on
donations, simplify the tax system for charities and donors, and encourage more
donations to charity’ (NAO 2013, 1.6). The 1999 Pre-budget statement, which
announced these changes, repeats the latter two reasons, saying that they were
intended ‘to encourage more individuals and businesses to give more, and to make
the taxation system simpler for donors and charities to use’ (quoted in NAO 2013,
Figure 5). These changes have recently received considerable attention in a National
Audit Office (NAO) report, Gift Aid and reliefs on donations, published in November
2013, and a subsequent report by the House of Commons Committee of Public
Accounts, Gift Aid and other tax reliefs on charitable donations, published in January
2014 and based on the NAO report and oral evidence taken before the Committee
on 2nd December 2013.

Looking specifically at Corporate Gift Aid, different accounts have emphasised
different reasons for the changes made in 2000. HMRC have indicated that the
change was made primarily with charities in mind, to simplify the system and reduce
the administrative burden (and so to benefit charities overall, but not by directly
encouraging more companies to give, or to give more). This was a particular
concern for charities with trading subsidiaries (such as charity shops), which donate
their profits as a Corporate Gift Aid donation. According to Lin Homer (Chief
Executive, HMRC) in her evidence before the Public Accounts Committee in
December 2013, more than 50% of corporate donations involve the trading
company of a charity handing over profits to the charity (Q25, see also Q35, Q37).
David Richardson (Director Counter Avoidance, HMRC) described in his evidence
that ‘the reason why the change was made in 2000 to switch the relief, so that the
trading subsidiary would simply pay the profits up gross to the charity, was in order
to simplify it’ (Q33).

Prior to 2000, it was a burdensome process for charities with shops, as the trading
subsidiary had to account to HMRC for tax and pay over money to HMRC, then the
charity had to reclaim the tax from HMRC and HMRC had to process that. An HMRC
impact assessment prior to 2000 said that the planned change would reduce the
regulatory burden for charities that had a ‘cumbersome procedure to get tax relief
on profit-shedding donations’ by their subsidiary trading companies (Third Sector
2014b). ‘The changes were made after consultation with charities and helped to
reduce administrative burdens for all businesses, including those that are charities’
subsidiary companies, such as charity shops that donate their profits to their parent
charity’ (Third Sector 2014b). The change also made the process simpler for
companies making donations, since in their annual returns to HMRC they no longer
have to account for how much they are paying to charities (a change which has had
unhelpful implications for evaluating the changes, as discussed below).
9


It’s worth pointing out that the benefits of simpler administration for charity
subsidiaries would have had to be very high indeed in order to compensate for the
loss of hundreds of millions of pounds in corporate gift aid.

Similarly, the Directory of Social Change (DSC) suggests that the focus was on
simplifying the system and reducing the administrative burden, particularly for
charities with trading subsidiaries. ‘The government decided to change the way
companies used Gift Aid in order to lift the administrative burden from the charities
having to claim back the tax on both individual and corporate donations. The theory
was that companies would increase the size of their donations to offset the loss of
the tax reclaimed via Gift Aid’ (DSC 2012). So rather than being intended primarily
to increase giving by incentivising companies to give more, the changes were made
to simplify the system for the ease of both charities and companies, and then it was
hoped that allowing companies to reclaim the tax would incentivise companies to
give more in order to prevent these changes bringing about loss. As discussed
above, following the Corporate Gift Aid changes, companies would need to give
25% more than previously for a charity to receive the same amount as it would
have received before.

Others have suggested that the changes were intended primarily to bring about an
increase in donations from companies, rather than to just increase charities’ income
indirectly (by removing administrative burdens and then ensuring there is no loss in
corporate donations). Challenging HMRC about the changes made in 2000, Margaret
Hodge, Chair of the Public Accounts Committee, argued that these changes ‘put a
lot of incentive into the hands of rich donors [and companies]. The idea was that if
we gave them back a lot of money, they would give more... The assertion is that
you have yet to prove that the radical change in 2000 is value for money for the
£1bn that has gone to corporations and high-worth individuals as a bribe to
encourage them to do more’ (Q27). As included in the purposes given for the wider
changes, quite apart from attempting to offset the loss generated by the reform,
the changes should also be expected to have increased corporate giving.











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Section 4
What can HMRC tell us about the
effectiveness of the reforms?

When the Government reformed reliefs on donations in 2000, HMRC’s predecessor,
the Inland Revenue promised that ‘the impact of the new measures...will be fully
monitored and evaluated once they are up and running’ (Inland Revenue 2000).
However, as the NAO have highlighted, HMRC failed to establish a framework, or to
collect data, by which they could evaluate the effectiveness of the changes. When
HMRC did undertake an evaluation in 2005, it found that it did not have the data it
needed to make a complete assessment of the impact or to draw conclusions about
whether the reliefs have increased giving.

As such HMRC is unable to conclusively determine whether the changes have
actually encouraged greater charitable giving (NAO 2013, 14). Whilst this report will
focus on the changes to Corporate Gift Aid, it is worth briefly mentioning that the
total sum in respect of reliefs on donations received by charities was found to have
dropped in real terms from £1.06bn in 1999-2000 (prior to the changes) to £1.04bn
in 2012-13, while over the same period the costs of reliefs claimed by individual
donors significantly increased from £130m to £940m (NAO 2013, 1.12). As Margaret
Hodge told the media, this is ‘pretty depressing... It is an extraordinary finding that
the financial benefit to donors from Gift Aid is almost as great as the benefit to
charities themselves’ (Independent 2013). Although initially rising after Gift Aid was
introduced in 1990, the amount paid to charities fell following the changes made in
2000, but has since risen to become similar in real terms to their value prior to the
changes taking effect NAO 2013, 1.9). Thus Hodge declared to the Public Accounts
Committee that ‘the charitable sector itself has caught up with what it was getting
from tax reliefs. It has taken the sector some time, but it has caught up—it has not
grown’ (Q27).

HMRC has a particular dearth of information relating to the Corporate Gift Aid
reforms. The changes in 2000 mean that companies no longer have to account for
how much they are paying to charities in their annual corporation tax return to
HMRC. Going forwards, tax returns will separate out how much companies are
donating and claiming tax relief on, however there remains a lack of data about
what happened after the changes up until this is established.

Prior to the reforms, HMRC data shows a reasonably positive picture of corporate
giving from the time that Gift Aid was introduced up until the changes were made.
According to HMRC figures, companies donated just over £3bn between 1990/91
and 1999/2000, with £971m in corporation tax being reclaimed by charities in real
terms. This made the total to charities worth £4.07bn (DSC 2012).

Company giving through Gift Aid (1990/91-1999/2000) (in 2011 prices)
11

(DSC 2012)


Since the introduction of Gift Aid in 1990, the value of donations made by
businesses grew on average by 74% per year in real terms, with some one-off large
donations skewing the figures (DSC 2012).

Year on year growth rates in company giving through Gift Aid (1990/91-
1999/2000) (DSC 2012)



In 2005 HMRC undertook an internal evaluation of the changes made in 2000,
based on commissioned research and its own evaluation of administrative data.
HMRC tried to get data on the changes to Corporate Gift Aid by surveying
companies on their donations, but the response rate was low and a number of
companies had imperfect data themselves. Nevertheless, it did find some ‘evidence
to suggest that changes relating to companies may have had a negative effect on
charities’ incomes and companies did not alter their donations in response to the
changes in tax relief. HMRC identified at this time that it did not have data on which
it could conclude a full evaluation’ (NAO 2013, 1.14).

12

In 1999-2000, prior to the changes, the value of Corporate Gift Aid was calculated
to be around £107m. HMRC has roughly estimated (based on corporate tax returns,
on a different basis to the pre-2000 figures) that Corporate Gift Aid cost around
£400m in 2012-13. The NAO states that this suggests ‘a significant growth in
corporate giving, which does not correspond with trends in corporate donations
reported by the charity sector. This could indicate a compliance risk’ (NAO 2013,
2.37). Questioning about the possibilities of abuse by members of the Public
Accounts Committee led to HMRC arguing that ‘we do not have any evidence to
suggest there is a problem with companies donating to charities and abuse’ (Q37),
however equally there appears to be little firm evidence demonstrating that there is
no problem.

Acknowledging the limitations of HMRC’s data, as well as the possibility of abuse of
the system, we will now consider what can be learnt from other sources of data
about trends in corporate giving, and whether they do indeed show an increase
since 2000.


13

Section 5
What can we learn from other data
about corporate giving trends?

As discussed above, HMRC stopped recording company donations after 2000 as part
of the wider changes. The reporting of corporate giving since 2000 is patchy and
there is no universally accepted standard, making measuring and benchmarking it
very difficult. Even if HMRC had continued to collect data, it would remain difficult to
attribute particular changes in corporate donation trends directly to the changes to
Gift Aid. For instance donations are likely to be related to profit growth and affected
by the wider economic climate and particularly a downturn
2
. Were it available, data
on corporate giving to non-UK charities over the same period would provide an
interesting comparison, since this would likely be affected by the wider context
(such as the economic downturn) but unaffected by the changes to Gift Aid.

Despite these caveats and the limited data that exists, it is useful to consider the
available evidence. The NAO argues that ‘research from the charitable sector is
inconclusive about how patterns of giving have changed, but there is no evidence of
a causal link between the changes to the reliefs and the value of donations’ (2013,
14). Even without being able to determine a causal link, unless the changes appear
to correlate with a substantial increase (i.e. over 25%) in corporate donations, we
can assume that they have not had the desired effect of offsetting loss, yet alone
increasing companies’ giving.

The NCVO UK Civil Society Almanac includes data on private sector income, which is
made up of voluntary income (from corporate grants and gifts, excluding payments
from charitable foundations set up by businesses) and earned income (from
corporate sponsorship, subcontracting, research and other services provided under
contract). According to the 2014 Almanac, in 2011/12 the voluntary sector received
4.6% of its income (£1.8bn) from private sector income, of which half was voluntary
(£0.933bn) and half was earned (NCVO 2014a). Compared to increases from
individual and statutory giving over the decade since 2000, the chart below shows
that total private sector income has barely risen over the last decade (NCVO 2014b).





2
Interestingly there is some evidence that responsible businesses fare better in strong
economic times, and that businesses that incorporate social and environmental factors into
their core business are able to respond faster and to have bounced back from the financial
crisis quicker. A BiTC Ipsos MORI poll in October 2008 found that companies which
consistently managed and measure their corporate responsibility outperformed their FTSE
350 peers on total shareholder return (TSR) in seven out of the last eight years. Further, the
TSR of these companies recovered more quickly in 2009 compared with that of their
FTSE350 and FTSE All-Share peers (THINK Consulting 2012).
14

Sources of income to voluntary organisations, 2000/01 to 2011/12,
£ billions (NCVO 2014b)



Total private sector income by year, £ billions (NCVO 2014b)

2000
/01
2000
1/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
1.7 1.2 1.0 0.7 2.5 1.7 2.1 2.3 2.2 1.6 1.8 1.8

This rather negative picture is supported by the Charity Aid Foundation’s (CAF’s)
Charity Trends survey of the top 500 corporate donors in 2003, which found that,
‘levels of cash donations in the UK fell in 2001-02, as companies failed to
compensate for the shift from net to gross giving introduced in April 2000’ (quoted
in DSC 2012). This survey found that giving from these 500 businesses to the sector
fell by 21% in the first two years after the change, a £66m decrease for charities
(Third Sector 2007). More recently, a Charity Times article describes DSC research
showing that the total value of donations from 550 companies fell by 9% whilst the
pre-tax profits for those companies increased by 55% over the same period (Charity
Times 2013). The DSC’s Company Giving Almanac 2013 found that donations to UK
charities and communities by the top companies had fallen by 16% compared to the
previous year, and that total support had fallen by 27% (DSC 2013).

There is some evidence that the apparent decrease in cash donations can be seen
15

as more of a shift from cash donations towards more in-kind giving, which is
unaffected by Gift Aid rules. A briefing by the Centre for Charitable Giving and
Philanthropy found that the ongoing recession seems to have accelerated a shift
away from cash donations to in-kind giving, although cash giving remains the norm
(around 70% of the top companies’ community support portfolios) (Cass 2012).
Research from the DSC has shown that company giving in the UK has remained
reasonably steady as a percentage of pre-tax profits, but has fallen in value terms,
whilst an increasing amount of donations have been made in-kind (The Charities
Trust et al. 2013). 62% of 106 community investment professionals surveyed by the
Charities Trust said that they had noticed a shift from cash donations to more in-
kind giving and volunteering (The Charities Trust et al. 2013).

Moreover, some have asked whether both corporate giving in cash and in-kind are
declining, as companies move towards partnerships and relationships with charities
based on shared social objectives (THINK Consulting 2012). Denise Lillya, a
researcher at the DSC, however argues that ‘cash and in-kind giving from
companies remain a crucial part of the funding environment for charities. Far from
being on the way out, [they] actually [have] huge potential for growth’ (Charity
Times 2013). She argues that such a decline is not supported by the research either
in terms of how the majority of companies give, nor what charities want. ‘For many
charities, cash will be the best tool for the job, and for many companies, cash will
be the most available and appropriate resource to meet what they see as their
social obligations’.

There may also be differences in how companies give according to their size. The
DSC found that 20% of companies gave 90% of the cash (DSC 2013), and it seems
likely that it is the biggest companies account for the majority of donations. Smaller
employers may perhaps have reason (unaffected by how Corporate Gift Aid works)
to choose to donate personally rather than through their company. Whilst both
corporate donations and personal donations as outlined below (according to the
current rules) have the same result for the charity and the individual on paper, they
have different advantages for the employer.

To donate £1000 to charity

Corporate donation Personal donation by an employer
How it
works
An employer can donate £1000 of
the company’s profits and reclaim
tax (e.g. £200 if pays tax at 20%)


The charity receives £1000

An employer can pay tax and pay
herself a dividend of £800, then
personally donate the £800 to
charity

The charity receives £1000 (£800
plus £200 tax refund). If the
employer is higher rate she will
get relief at the higher rate.

Advantages
for the
employer
For your business to be known
for its involvement in social and
community engagement
To maximise your business profits
on your accounts

16


To motivate staff on wider social
issues
To increase the amount a
mortgage lender will give you

If there are several shareholders
who don’t agree on which charity
to support and by how much

The advantages of making a personal donation rather than a corporate donation
may be particularly likely to appeal to small company owners. Therefore it is
important to recognise that the data available is not only patchy specifically relating
to corporate donations, but also that it might not reflect a more inclusive definition
of donations from the private sector. Whilst some employers may not be making
corporate charitable gifts, they may instead be personally donating as a result of
their company’s profit.

17

Section 6
Conclusions

Looking back at the reasons given for changing Corporate Gift Aid, we need to
consider whether the reforms sufficiently simplified the system to the benefit of
charities, and whether they incentivised companies firstly to increase their giving to
prevent a loss to charities, and preferably, to increase it beyond what was given
prior to the reforms.

Whilst the simplification to the system was intended to benefit charities with trading
subsidiaries, it needs to be asked whether this benefit outweighs more negative
impacts of the change. According to John Hemming, Chair of the Charity Tax Group,
‘Corporate Gift Aid is an example where simplification resulted in a loss of donations
to charities’ (Third Sector 2014d). Moreover, the Public Accounts Committee argued
that the changes do not adequately simplify the tax rules for reliefs on donations,
and argues that further simplification to both reduce abuse and make the system
easier and simpler for charities to claim the reliefs (2014, 5).

Has offering a tax incentive led companies to sufficiently increase their giving such
that charities have not incurred loss? The evidence available may be patchy, but the
picture seems to be rather more likely to be negative. According to NCVO figures
private sector income has barely risen between 2000 and 2011, whilst CAF and DSC
research indicates evidence of some decline in corporate giving.

The Institute of Fundraising (IoF) has called on the Government for a reversal of the
reform so that charities can once again benefit from tax relief on corporate
donations, both at the time of the 2007 Gift Aid review and earlier this year (Third
Sector 2014a). In 2007 the IoF found that 87% of its members wanted the tax relief
to go to charities rather than companies. Mark Astarita, Chair of the IoF and
Director of Fundraising at the British Red Cross, recently labelled corporate Gift Aid
‘the best example of a tax relief gone wrong’ (Third Sector 2014a). In his words, ‘no
one has ever asked me for a tax break when they decided to give’ (Third Sector
2014a). Similarly, the DSC’s chief executive Debra Allcock Tyler has argued that the
DSC has been attempting to convince companies of the business case for giving for
over 30 years, but that over this period ‘company giving has not increased or
improved – it has got worse’ (Charity Financials 2013).

There is some concern within the charity sector about the effect of returning
Corporate Gift Aid to charities. For instance, John Hemming suspects that it would
meet with ‘resistance from the corporates’ (Third Sector 2014d) and CAF is
concerned that it might prompt companies to reduce their giving. A spokesman for
CAF told Third Sector that ‘we think it’s important to do all we can to encourage
companies to give the most support they can to charities. The feedback we’ve had
is that the current tax arrangements are important and encourage companies to
18

give’ (Third Sector 2014b). If we accept that enabling companies to claim Gift Aid
on donations has not substantially increased their propensity to give, it could be
argued that companies should not therefore be too concerned about the removal of
this tax relief, since they haven’t been exploiting it as much as might have been
hoped for. On the other hand, reflecting a pessimistic view of company giving
(particularly if we accept CAF’s research (discussed in DSC 2012) that there was a
decline in corporate giving following the changes in 2000), it could be feared that
taking this tax relief away from companies will offer them an excuse to reduce their
giving.

However, as we saw above, for charities to have been unaffected by the initial
changes to Corporate Gift Aid made in 2000, companies would need to have
increased their donations by 25% (although this would not reflect the actual cost to
them). The evidence we have considered here makes it seem highly unlikely that
this has happened, so charities are likely to have lost out on corporate donations in
the intervening period. If the changes were reversed, companies could donate 20%
less than currently without charities seeing a dip in what they currently receive.

Next steps

The lack of conclusive data relating to the changes to gift aid made in 2000 is
frustrating on different levels. It demonstrates HMRC’s failure to introduce these
reforms in a responsible and evidence-led manner, so potentially undermining trust
in their work. Nevertheless, this analysis has clearly shown that for charities to have
benefitted from the reform to Corporate Gift Aid, corporate giving would need to
have increased by over 25%. Albeit patchy, the evidence available gives no hint that
this has happened, and if anything paints a far more negative picture of a
downward trend in corporate giving. Moreover, this analysis has argued that
charities will not suffer from a reversal of the reform if it results in companies
reducing their current levels of giving by anything up to 20%. This seems like a
reasonable risk to take.

To strengthen the case for a reversal of the reform further, it would be beneficial to
estimate how much this could be worth to the charity sector. Our own estimate is a
simple extrapolation of current data. So according to the NCVO Almanac 2014,
£0.933bn was given in corporate donations and gifts in kind in 2011/12. So if
charities had been able to claim Gift Aid on this, as previously, they would have
gained an additional £233 million (or £0.233bn) – and received a total of £1.17bn in
corporate donations and gifts in kind. While this can only be an estimate it
demonstrates that reversing the 2000 change would bring hundreds of millions of
extra revenue to the sector (with no cost to government).

The purpose of this briefing has been to bring together all the existing data on
corporate gift aid and company giving. The next stage is for original research
amongst fundraisers, companies and other key stakeholders. For instance what do
charities with trading subsidiaries think about the extent to which the simplification
to the system benefitted them, and what impacts a reversal might have on them.
19

The aim of this would be to find out what the current appetite and barriers are to
changing the system back to a pre-2000 model. Our research has established that
the (limited) evidence there is suggests that the change in 2000 saw charities lose
out in income, and corporate giving remain flat, if not declining, rather than increase
as was hoped.
20

Section 7: Bibliography

All websites accessed March or April 2014

Cass Business School and the Directory of Social Change (2012) UK corporate
citizenship in the 21
st
century: CGAP Briefing Note 9 Catherine Walker and Cathy
Pharoah, with Marina Marmolejo and Denise Lillya
http://www.cgap.org.uk/uploads/Briefing%20Notes/CGAP%20BN9%20Corporate%2
0Giving.pdf

The Charities Trust, Corporate Citizenship and Medicash (2013) The Future of
Corporate Giving Report http://www.charitiestrust.org.uk/the-future-of-corporate-
giving/

Charity Financials (2013) Lloyds named as UK's biggest corporate donor 19 August
2013
http://www.charityfinancials.com/caritas-magazine/lloyds-named-as-uks-biggest-
corporate-donor-1351.html

Charity Times (2013) Cash donations from companies fall whilst profits soar, says
DSC Andrew Holt, 16 May 2013
http://www.charitytimes.com/ct/cash_donations_from_companies_fall_whilst_profits
_soar.php

Directory of Social Change (DSC) (2012) 21 years of Gift Aid: Charity Fundraising
Comes of Age. Research Report
http://www.dsc.org.uk/PolicyandResearch/News/giftkeepsongiving

Directory of Social Change (DSC) (2013) Company Giving Almanac 2013 Infographic
http://www.dsc.org.uk/PolicyandResearch/policyandcampaigning/policypositions/co
mpanygiving

House of Commons Committee of Public Accounts (2014) Gift Aid and other tax
reliefs on charitable donations: Forty-first Report of Session 2013–14. Report,
together with formal minutes, oral and written evidence
http://www.publications.parliament.uk/pa/cm201314/cmselect/cmpubacc/835/835.p
df

Independent (2013) Gift Aid giveaway is costing the taxpayer £940m Cahal Milmo
21 November 2013
http://www.independent.co.uk/news/uk/politics/gift-aid-giveaway-is-costing-the-
taxpayer-940m-8952807.html

Inland Revenue (2000) Final regulatory impact assessment: Getting Britain giving in
the 21st Century www.hmrc.gov.uk/ria/ria_giving.pdf

21

National Audit Office (2013), Gift Aid and reliefs on donations: HC 733 Session
2013-14, 21 November 2013 http://www.nao.org.uk/wp-
content/uploads/2013/11/10302-001-Gift-Aid-Book1.pdf

NCVO (2014a) UK Civil Society Almanac 2014 What are the sector’s different
sources and types of income? http://data.ncvo.org.uk/a/almanac14/what-are-the-
sectors-different-sources-and-types-of-income-3/

NCVO (2014b) UK Civil Society Almanac 2014 What are the sector’s sources of
income? http://data.ncvo.org.uk/a/almanac14/what-is-the-sectors-most-important-
source-of-income/

THINK Consulting (2012) Global Corporate Engagement http://www.institute-of-
fundraising.org.uk/library/global-corporate-engagement/

Third Sector (2007) Hot issue: Should the Government make changes to corporate
Gift Aid? Third Sector, 10 October 2007
http://www.thirdsector.co.uk/news/Article/743416/hot-issue-government-changes-
corporate-gift-aid/

Third Sector (2014a) Government urged to 'give us the Gift Aid back on corporate
donations' Jenna Pudelek Third Sector Online, 23 January 2014
http://www.thirdsector.co.uk/Finance/article/1228337/government-urged-give-us-
gift-aid-back-corporate-donations/

Third Sector (2014b) Analysis: Institute of Fundraising calls for Gift Aid reform
Jenna Pudelek, Third Sector, 27 January 2014
http://www.thirdsector.co.uk/Fundraising/article/1228570/Analysis-Institute-
Fundraising-calls-Gift-Aid-reform/?HAYILC=RELATED

Third Sector (2014c) HM Revenue & Customs 'failed to collect data on Gift Aid and
its effect on giving' Jenna Pudelek, Third Sector Online, 5 February 2014
http://www.thirdsector.co.uk/news/1229955/HM-Revenue---Customs-failed-collect-
data-Gift-Aid-its-effect-giving/

Third Sector (2014d) Sector reacts positively to Public Accounts Committee report
on Gift Aid Jenna Pudelek, Third Sector Online, 5 February 2014
http://www.thirdsector.co.uk/go/finance/article/1230086/sector-reacts-positively-
public-accounts-committee-report-gift-aid/

22

About nfpSynergy
nfpSynergy is a research consultancy that aims to provide the ideas, the insights
and the information to help non-profits thrive.

We have over a decade of experience working exclusively with charities, helping
them develop evidence-based strategies and get the best for their beneficiaries. The
organisations we work with represent all sizes and areas of work and include one in
three of the top 100 fundraising charities in the UK.

We run cost effective, syndicated tracking surveys of stakeholder attitudes towards
charities and non-profit organisations. The audiences we reach include the general
public, young people, journalists, politicians and health professionals. We also work
with charities on bespoke projects, providing quantitative, qualitative and desk
research services.

In addition, we work to benefit the wider sector by creating and distributing regular
free reports, presentations and research on the issues that charities face.

Our size and our story: nfpSynergy was created in 2002 as a division of the
Future Foundation. Two years later, the founder Joe Saxton led a management buy-
out. We now have an annual turnover of £1.4 million and 18 staff members,
including a variable number of interns. We also own our own premises in
Spitalfields.

Tracking research: We run tracking surveys that monitor the attitudes and
opinions of key stakeholder groups relating to the not-for-profit sector. The research
is carried out on behalf of a syndicate of participating charities who share costs and
data. The aim of our tracking studies is to provide lower cost, more frequent and
more detailed research than any organisation could achieve by acting on its own.
Our monitors include:

Charity Awareness Monitor (CAM) - the general public
Journalists’ Attitudes and Awareness Monitor (JAAM) – journalists
Charity Parliamentary Monitor (CPM) - MPs and Lords
Youth Engagement Monitor (YEM) – young people
Brand Attributes (BA) – brand awareness among the general public

In addition, we have developed syndicated tracking studies on local authorities,
politicians in the devolved bodies, the general public Scotland, Wales and the
Republic of Ireland and regional audiences across England.

Qualitative research and consultancy: Each year we deliver around 30 projects
for non-profit clients. We carry out focus groups, conduct face-to-face and
telephone depth interviews, run workshops and perform small and large scale desk
research projects. Our clients include charities, housing associations and public
bodies who use our research to inform their strategies and planning.

23

Our consultancy work and projects cover a vast range. For example, we have
recently worked with The Scout Association to develop a new membership strategy
with current and former members, parents and Scout leaders. We have worked with
Macmillan Cancer Support on a number of projects enhancing their service provision
and delivery using qualitative research. Last year, we completed a piece of work for
Scope, evaluating their vital ‘Face 2 Face’ befriending service for parents of disabled
children.

Some of our clients include:








Social investment: Our social investment programme runs as a thread through
every aspect of our business. At its core is the range of free research reports and
briefings we produce each year to benefit non-profit organisations, which can be
downloaded from our website. We use evidence from our research to campaign on
behalf of charities on key issues, such as reducing the costs charged by mobile
phone companies for charitable donations by SMS. We also support small non-
profits by providing free places at our seminars, giving talks to groups all over the
UK and through pro bono research assistance. In addition, we support
CharityComms (the sector body for communications) by providing them with free
office space. Our approach to business shows that even a small company can put
social investment at the heart of a business, contribute a huge amount to help
voluntary and community organisations and still be profitable.

Topics on which we have produced free reports include:
understanding young people’s
help seeking behaviour
branding
fundraising
volunteering
how charities use the internet
and new technology
governance

By producing free reports, editorials and presentations we help small charities (with
little or no budget for research) to benefit from our wealth of data and knowledge of
the third sector. Please see descriptions of all of our free research at
www.nfpsynergy.net/freereports

As full members of the Market Research Society, we comply with their
code of conduct at all times, ensuring that research is carried out in a
professional and ethical manner. We also have high standards of data
protection – find out more about on our website at
www.nfpsynergy.net/dataprotection



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