The cost of administrative challenges

Gift Aid can significantly support charity income by allowing charities in the United Kingdom to claim tax relief on eligible donations made by UK taxpayers. It can be applied to various types of donations, including one-off donations, regular donations, donations made through fundraising events, and certain donated goods sold by the charity. For every £1 donated, a charity can claim an additional 25p from the government, at no extra cost to the donor which can have a substantial impact on a charity’s financial resources.

By effectively promoting, explaining, and maximising Gift Aid, charities can increase their income, expand their impact, and better serve their beneficiaries and communities. Yet despite the significant funding boost Gift Aid provides, the Charities Aid Foundation (CAF) has estimated that charities in the UK are missing out on over £560 million[1] in unclaimed Gift Aid each year. This estimation is based on several factors such as donors not providing Gift Aid declarations, incomplete declarations, and other administrative challenges.

The updated fundraising landscape

According to data from the UK Civil Society Almanac[2] published by the NCVO, the total income of the UK voluntary sector (which includes charities) has shown gradual growth over the past 3 years, with the estimated total income of the sector now exceeding £50 billion. The fundraising landscape has also changed significantly, mainly due to the rise of technology alongside many cultural and societal shifts.

In response, charities have developed alternative ways of fundraising which provide greater flexibility and sustainability, diversifying their income streams and reducing reliance on grants. The COVID-19 pandemic posed a significant challenge to fundraising, particularly in relation to traditional in-person events to which many charities turned to embracing digital methods and virtual events. Charities now have a wide range of digital fundraising platforms and tools available to help them raise funds online and engage with donors. These platforms offer various features and functionalities, allowing charities to create campaigns, collect donations, and manage their fundraising efforts efficiently.

One example of charities embracing online platforms includes Gaming for Good initiatves which is when individuals or teams raise money for good causes through playing video games. Typically, people also record themselves when they are playing and broadcast it live for others to watch online. Charities can claim Gift Aid on donations received from digital events by following the same principles and guidelines as they would for traditional fundraising activities.

How far back can a charity claim Gift Aid?

UK charities can claim Gift Aid on donations made within the last four years. By doing so, they can receive back the basic rate tax on those donations from HM Revenue and Customs. However, there are specific rules and regulations that must be followed to qualify for the scheme. It is important for charities to maintain accurate records of donations and Gift Aid declarations to support their claims and comply with HMRC regulations.

Gift Aid giving power

The Gift Aid scheme aims to encourage charitable giving and support the work of nonprofit organisations. It plays a significant role in supporting the fundraising efforts of charities in the UK, providing them with additional income to carry out their essential work and contribute to various causes. It’s also a way for donors to make their contributions go further and have a greater impact on the organisations they support.

To claim Gift Aid, charities need to follow specific procedures and meet certain requirements set by HMRC. They must be eligible to participate in the scheme, which most UK charities are, but certain types of organisations, such as schools, hospitals, and political parties, may have limitations. Charities must obtain Gift Aid declarations from donors, which is written statement from the donor confirming their status as a UK taxpayer and giving permission for the charity to claim Gift Aid on their donations. These declarations can be collected in various ways, including paper forms, online forms, and verbally over the phone. Charities must keep records of these declarations and donor information as evidence for HMRC as this information is essential for submitting accurate claims. This relies upon accurate donor data.

Streamline Gift Aid submissions

The most vital information required to claim Gift Aid is the donators first line of address, town, and postcode. Without this, HMRC will reject the claim. Implementing address data validation solution at the point of data capture will ensure only valid data is entering your system, eliminating errors in the donor database and enhancing the quality of Gift Aid claims.

Powered by the most precise address and location data, Experian Address Validation is the most effective way to ensure only accurate, complete and correctly formatted addresses populate your database. The tool can validate and verify business and consumer addresses in real-time at the point of capture and in bulk for the existing address records in your database. This is particularly useful as Gift Aid can be claimed within 4 years of the end of the financial period you received it.

Addresses can also be enriched with additional attributes such as latitude/longitude coordinates, lifestyle and demographic data, business data, and Unique Point Reference Numbers (UPRNs) and more to provide a more detailed view of your donors, making your data even more useful for segmenting and targeting donors and developing appropriate communication strategies to build an on-going relationship.

Having validated donor addresses ensure that the charity is claiming Gift Aid on the correct donation amounts and from eligible donors and reduces the likelihood of Gift Aid claims being rejected by HMRC due to inaccurate or incomplete donor information. It also helps verify the eligibility of donors by confirming their UK residency since only donations from eligible UK taxpayers qualify for Gift Aid claims. Accurate data also requires less manual intervention and correction, saving time, money and resource which can be more effectively deployed elsewhere. It will that the claims meet critical HMRC and regulatory requirements.

How can we help?

Gift Aid aside, implementing address data validation will contributes to overall data integrity, making the donor database more reliable and consistent, contributing to a positive donor experience and may encourage repeat donations and continued support.

Validated data will facilitate effective communication between the charity and donors; sending out acknowledgment letters, updates, and other communications related to Gift Aid claims, or any other communication the charity wishes to send to their donor base will reach the right person at the right time.

Talk to us to find out more about how your charity can leverage the benefits of address data validation to successfully claim Gift Aid and significantly increase revenue.

Get in touch

Find out how your charity can leverage the benefits of address data validation.

Get in touch

[1] How has the pandemic impacted our behaviours in giving to charity?, Charities Aid Foundation

[2] UK Civil Society Almanac 2022, National Council for Voluntary Organisations

Copy Link Copied to clipboard