At the moment, every day seems to bring fresh comment on the perilous state of the economy and in particular, the outlook for charities dependant on donations from companies and individuals. The recent collapse of substantial commercial donors will clearly hit hard, but it is the impact of the loss of individual donors that is the focus of this article.
More than ever, it is important to maximise income from donations from individuals. Clearly finding new sources is key, but what about the tax efficiency of the donations already received? Making sure that donations qualify for Gift Aid adds 25p to every £1 raised. In addition, for the period up to 6 April 2011, the Government will add a further 3p to maintain the position that existed before the basic rate of income tax was cut on 6 April this year.
In our experience, many charities do not maximise their Gift Aid recoveries from the Government. Typically those charities affected are ones that receive a large amount of small donations, sometimes in cash e.g. churches. However, it is not only the nature of the donations that leads to under recoveries. It is often the level of understanding and resource that is dedicated to this issue by charities. This is borne out by recent research conducted by the Government and the Charities Aid Foundation which recognised that this is a serious issue. To illustrate the impact, if £10,000 of non-qualifying income can be converted into qualifying through improvement in process, then additional income of approximately £2,800 can be generated. Let’s assume that the average donation received by the charity from individuals is £100, this would be the equivalent of finding 28 new donors.
In a period where income levels will in all likelihood suffer, there is clear benefit in charities making sure they are maximising income from what is already theirs. As Gift Aid specialists, we can provide advice on making sure that not only do appropriate processes exist, but also that they are as efficient as possible to maximise the income of your Charity.
Undertaking a review now and implementing change will also put your Charity on a firm footing for when the transitional relief currently paid comes to an end in 2011.
For further information please contact Richard Lupson-Darnell or Vantis' Charity & Not for Profit Group or please complete the online enquiry form below.