Draft Small Charitable Donations Act (Amendment) Order 2019

Clive Lewis Excerpts

Tuesday 12th February 2019 General Committees

[Clive Lewis (Norwich South) (Lab)]

Good morning, Mrs Moon. As the Minister outlined, the Small Charitable Donations Act 2012, which came into force on 6 April 2013, introduced a new scheme to enable charities and community amateur sports clubs to claim a gift aid-style top-up payment on small cash donations of up to £20 in circumstances in which it is not practical or feasible to obtain a gift aid declaration. The draft order will increase to £30 the maximum individual small charitable donation on which such payments can be claimed. My understanding is that eligible charities and CASCs can claim top-up payments up to £8,000 for small donations each year.

As hon. Members are probably aware, the gift aid small donations scheme was established in 2012 with cross-party support. The Small Charitable Donations and Childcare Payments Act 2017 then made several changes to gift aid small donations to simplify and increase access to the scheme, particularly for smaller and newer charities, including allowing small donations covered by the scheme to be made by contactless payment from April 2017. Although the Opposition welcomed that streamlining to create legislative clarity and coherence, we have continued to emphasise the need for robust Government monitoring of the gift aid small donations scheme, especially in relation to its use for fraud or tax evasion. Will the Government publish any information that they have on the matter?

Unfortunately, there have been cases of charities being used as vehicles for tax avoidance and fraud. It is incumbent on us to make it as hard as possible to abuse charitable status. During the passage of the 2017 Act, the Opposition tabled a new clause that would have required a review of the prevention of fraud and abuse in the small donations scheme. Such a review would need to address the number of penalties imposed under the 2012 Act and the circumstances giving rise to the imposition of such penalties. It should also include HMRC’s assessment of the extent to which charities have been established or have operated for the primary purpose of securing benefits from the small donations scheme, and of the evidence available on the role of the gift aid matching rule in preventing fraud and abuse. Will the Minister update us on whether the Government will consider such a review?

Has there been any evidence of the gift aid small donations scheme being used for fraud or tax evasion? Will the Government publish any information that they have on it? Will the Minister also update us on the Treasury’s monitoring of any potential loopholes? The explanatory memorandum to the draft order notes that

“20 per cent of organisations currently participating in the GASDS are already claiming at, or close to, the overall limit of £8,000 per charity (or community building).”

I note that charities can claim up to £8,000 per building; do the Government have data on how many organisations are claiming for more than one building? How much of the gift aid small donations scheme benefit has accrued to large organisations claiming for more than one building? Are there any plans to increase or decrease the £8,000 limit after the donation size has been increased?

The Government’s policy paper states:

“Following stakeholder feedback the government has decided to increase the individual donations limit for GASDS to £30. A consultation is not needed to make this small change.”

However, an increase of 50% from £20 to £30 is very significant. What is the evidence base for that figure? What estimate have the Government made of the effect on how and by whom donations are made? The policy paper further states:

“This measure will be monitored through information provided in correspondence and regular feedback from the charity sector.”

The draft order is exempt from the requirement to provide a review provision in accordance with section 28(3)(c) of the Small Business, Enterprise and Employment Act 2015, as it relates to

“the giving of grants…by…a public authority”.

None the less, as the Opposition have noted a number of times, it would be advantageous to have a more comprehensive and transparent process in place.

[Patrick Grady (Glasgow North) (SNP)]

The spokesperson for the official Opposition, the hon. Member for Norwich South, raised some interesting points, but I did not pick up whether he supports the draft order. It is important that his questions be answered and considered, but the draft order will make a relatively minor change that I think will broadly be welcomed by the charitable sector. In my experience in the sector before coming to Parliament, I have seen the difference that gift aid can make to the operation of charities, especially small and community-based organisations and churches, which the Minister mentioned. The opportunity to reclaim from the likes of street collections, where it is not physically possible to collect gift aid information, is valuable.

[Clive Lewis]

We will probably abstain, but may I pick up the point the hon. Gentleman is making? It is easy to assume that all charities are charitable in their nature and how they operate, but clearly there are some with the potential not to do what they say on the tin. According to the Lloyds Bank Foundation,

“the proliferation of larger public service contracts meant that new types of charity had emerged, which had little interest in meeting local community need, but were instead ‘driven by market share’ and ‘prepared to slash costs to win contracts, with little regard to service quality.’”

We also know that there can be fraud and that charities can be used as a front for it. Our position is simply that there needs to be transparency.

[Patrick Grady]

That is very helpful. I do not necessarily disagree with any of it, but I would be concerned about standing in the way of a relatively minor uplift that would be beneficial, taking into account inflation and the increasing frequency and popularity of contactless donations. I totally agree with the points on transparency and on the need for that kind of scrutiny to continue. On that basis, I will not oppose this measure.

I want to respond to one other point that the Minister made. He said that not all small charities—legitimate local charities—necessarily take all this up. Perhaps there is a job for some us as constituency Members to encourage smaller community organisations that do not realise that this opportunity is available to them.

On at least one note of consensus, I notice that paragraph 8.1 of the explanatory memorandum states:

“This instrument does not relate to withdrawal from the European Union.”

I am sure that we all look forward to the day when we see that more frequently in explanatory notes.