Draft Small Charitable Donations Act (Amendment) Order 2015
(Limited Text - Ministerial Extracts only)
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The Exchequer Secretary to the Treasury (Damian Hinds)
I beg to move,
That the Committee has considered the draft Small Charitable Donations Act (Amendment) Order 2015.
It is a great pleasure to serve under your chairmanship, Mr Pritchard. I welcome the hon. Member for Salford and Eccles to her place. This is the first chance that we have had to interact in a Committee, although I hope today’s will be of modest duration.
The Government recognise the valuable contribution that the UK’s 165,000 charities make to many aspects of our society. That is why we continue to help charities achieve their charitable objectives and incentivise their donors, including through tax reliefs that were worth more than £4.5 billion in 2014-15. It is also why the Government have announced an increase in the limit for the gift aid small donations scheme from £5,000 to £8,000 per charity per year. The order provides a further opportunity to enhance Government support for charities, and the communities that they serve, by allowing charities to claim an additional top-up from Government on the contributions that they receive from their donors.
Gift aid is a well established and significant revenue stream for charities. Since 1990-91, more than £13 billion of gift aid relief has been paid to charities. However, it is not always possible or practical for all charitable donations to be accompanied by a gift aid declaration—for example, when charities collect donations in high street collecting tins or when churches receive donations via the collection plate. In 2013, the Government therefore introduced the gift aid small donations scheme, which was designed to help charities receive a gift aid-style top-up payment—a 25% top-up from Government—on small cash donations. The scheme is not, and is not intended to be, a substitute for gift aid. If a donor makes a larger donation or the donor can reasonably complete a gift aid declaration form, gift aid should be claimed.
In the first year, 2013-14, 8,100 charities claimed a total of £6 million through the scheme. Take-up increased last year; in 2014-15, 19,300 charities claimed a total of £21 million. Our intention is to continue to raise awareness of the scheme and to ensure that it can support a greater number of charities and of donations. At the 2015 Budget, the Government announced an increase in the annual limit on donations on which a charity can claim through the gift aid small donations scheme, from £5,000 to £8,000. The purpose of today’s debate is to agree that change so that it can come into effect from April 2016. The change will enable charities to claim up to £2,000 of Government support on up to £8,000 of donations, compared with the maximum £1,250 that can be claimed under the current £5,000 donations limit.
The Government expect the increase in the limit particularly to benefit the 7,200 charities that currently claim on the full £5,000. For other charities, I hope that the prospect of greater financial support from Government will provide an increased incentive to sign up to the scheme.
For completeness, I should mention that at the autumn statement the Government announced that they would review the scheme. The review will begin with a call for evidence from charities and other interested parties, which will be published before Christmas.
The increase in the scheme limit will provide additional support for charities that receive small, often spontaneous donations. It is right that the Government enhance those donations through the gift aid small donations scheme, because they are vital to charities and embedded in our country’s culture of philanthropy. I look forward to dealing with any questions that members of the Committee may have.
Damian Hinds
The Government are heartened by the support shown throughout the Committee for the gift aid small donations scheme. Several questions have been asked about the scheme’s general performance and the statistics behind it. Last year, 19,300 charities claimed a total of £21 million. We would like that to increase, and that is the point of the changes that we are introducing and the review that I mentioned. My hon. Friend the Member for Yeovil asked where that number sits in the overall universe of charities, and I can tell him that here are a total of 165,000 charities. A question was asked about the median claim. I do not have that number to hand, but I will be happy to follow up on it in correspondence.
Our general objective is for the scheme to be as simple, straightforward and low-cost for charities as possible, consistent with having a scheme in which everybody can have confidence and in which reasonable steps are taken to act against any potential misuse. That is why various safeguards are in place. For instance, a charity has to have been in the gift aid scheme for at least two of the previous four years, and given that the small donations scheme is a cash scheme, what a charity claims cannot be more than 10 times what goes through its regular gift aid programme.
The hon. Member for Stoke-on-Trent South asked the reasonable question of why the figure is £8,000, not £7,500 or £8,500. There is of course no precise answer to that question, but there has to be a number, and it is based on a judgment of what is consistent. The scheme is not about replacing gift aid. Unlike regular gift aid it is taxpayer support, not a tax relief. The £8,000 figure is appropriate and consistent with the scheme having reasonable safeguards in it and being as unsusceptible as possible to state aid action.
The hon. Member for Salford and Eccles asked the reasonable question of what the Government are doing to increase awareness. She also asked whether more charities should know about the scheme. There is always a certain degree of ramp-up in any new programme, and the Government have been trying to do more. We want to raise awareness of the scheme and have more charities and donors taking part in it. Through the HMRC outreach team, which was established in 2014, the Government have delivered face-to-face presentations to more than 650 charities to spread awareness, increase take-up and help charities receive support through the scheme and available tax reliefs. Furthermore, through the introduction of Charities Online in 2013, we have made it faster and simpler for charities to claim reliefs. Some 95% of charities submit claims online rather than through paper applications, and the majority of claims are processed within five working days, which is down from about 15 working days.
There have been number of suggestions, questions and comments on various aspects of the scheme, and they are all germane, but they are all also subject matter for the review of the scheme. I was asked about the timing of the review, and the call for evidence should come out before Christmas. It remains to be seen how many organisations and individuals respond to that call, but we hope to have very good material and a good opportunity for feedback, critique and suggestions on how to make the scheme even more successful. It was mentioned that these days, it is possible to make a digital payment almost as quickly as a physical one—through contactless payment, for example—yet the small donations scheme applies only to cash. The review will cover all aspects of the scheme, including questions about digital payments.
The Government are heartened to hear the support from members of the Committee today. As I said, the increase in the small donations scheme limit represents an additional way in which the Government are supporting the charity sector. It will enable a significant number of charities, especially the 7,200 that already claim their full top-up under the existing £5,000 limit, to access greater financial support from the Government. I commend the order to the Committee.
Question put and agreed to.