National Audit Office - HM revenue & Customs: Gift Aid and Reliefs on Donations - HC 733

Book excerpt: Gift Aid provides an important source of income for many charities but it is important that they are properly administered. There is not enough evidence to conclude that reliefs on donations in their current form, and the way they are implemented, provide value for money. First, there is insufficient evidence that government has actively encouraged take-up of the reliefs so that those charities which are entitled to them get the intended benefits. Secondly, HMRC has not collected the data which would enable it to conclude how tax incentives since 2000 have affected donor behavior or if they have increased the value of donations. Changes introduced in April 2000 were intended to encourage more people to give more to charity. HMRC undertook evaluative work but this did not provide assurance that they had resulted in more income for charities. HMRC also faces a serious compliance challenge in respect of reliefs on donations, in particular from avoidance. While the proportion of charities set up to abuse charitable status is very small, the cumulative costs of small-scale avoidance activity are large, accounting for £110 million of tax lost in 2012-13. HMRC has also identified eight marketed avoidance schemes, which it is challenging robustly, estimating that they are putting £217 million of tax at risk. The Department has made a working estimate that £170 million was lost in 2012-13, based on its analysis of tax loss in related areas. However, it recognizes that its methodology is crude and may understate the level of loss