Taxman grabs tsunami charity cash
London Times | April 25, 2005
By Alexandra Frean and Philip Webster
BRITAIN’S largest charities have been unable to collect millions of pounds pledged for the victims of the Asian tsunami, The Times has learnt.
The charities involved have failed to secure more than £9 million tax relief on money pledged in telephone donations because, under Revenue & Customs rules, it cannot be claimed over the phone.
The disclosure by The Times sparked an immediate intervention by Gordon Brown. The Revenue said that it was ready for talks this morning with the committee co-ordinating Britain’s charitable response to the disaster last December.
Mr Brown called David Varney, the Revenue chairman, and they agreed to remove the obstacles. The Chancellor, who promised in January that the Treasury would pay 28p under the Gift Aid scheme for every pound donated by the public, was furious to be told of the difficulties. He had urged senior officials to ensure that everything possible was done to maximise tax relief.
Until his intervention, the Disasters Emergency Committee (DEC) was preparing to write to 1.2 million telephone donors asking them to confirm in writing that they wanted Gift Aid for their donations.
A spokesman for Mr Brown said: “At the outset of the tsunami appeal, we agreed with the revenue departments to do everything possible to maximise the tax relief available and to make that process as easy for the charities and their donors as possible.
“As a result, tens of millions of pounds have so far been paid by the Government in VAT and Gift Aid relief on top of those donations. As soon as this specific issue came to light, the Chancellor agreed immediately with David Varney that the Revenue would take action to resolve it.”
A Revenue spokesman said: “We are happy to be flexible, as we have always been to date.”
The problem was revealed as the main political parties focused on international aid efforts to mark World Poverty Day yesterday. At a London rally, Bill Clinton, the former US President, supported Tony Blair’s election campaign, saying that the Prime Minister and Mr Brown were providing the right leadership to tackle world poverty. He also delivered an implicit warning to Labour voters not to abstain on May 5.
The committee wrote to Mr Blair on January 16 asking him to make Gift Aid automatic on telephone pledges if the donor agreed, but had had no answer.
Brendan Gormley, chief executive of the committee, said: “Not just the DEC, but the Charity Tax Reform Group would welcome the Government relaxing the Gift Aid rules so that written confirmation is not required.”
Mr Gormley has widespread support among charities. Some believe that the Revenue, which has data on all taxpayers, should be responsible for confirming Gift Aid with donors and say that the current rules require charities to do the Revenue’s work for it.
Simon Hebditch, of the Charities Aid Foundation, said that he believed that the Government should make a special case of the appeal for last December’s tsunami disaster.
“The Government should recognise the situation of the DEC appeal,” he said. “Rather like the exemption from VAT for Bob Geldof’s Christmas charity record, the Government should treat the tsunami appeal as a special case.”
The appeal raised a record £300 million and could expect to recover a further £21 million in Gift Aid, which enables charities to receive an extra 28p from the Revenue for every pound donated by a taxpayer, making a £10 donation worth £12.80 to the charity at no extra cost to the donor.
Some £12 million of the Gift Aid relates to donations made by post or at banks and post offices, where donors have indicated in writing that they want Gift Aid added. But £9.3 million relates to telephone donations, where donors made a verbal declaration that they wanted Gift Aid. Under Revenue rules, a verbal declaration of Gift Aid “will not be effective unless and until the charity or its representative sends the donor the written record of the declaration”.
Even then, charities must give donors a 30-day cooling off period. A Revenue spokesman said that the rules were to protect against donors not understanding information given over the telephone.
The Department for International Development said that it was expecting Gift Aid relief on tsunami appeals run by the DEC and other charities to amount to £50 million.