The Case Against Gift Aid
Initiated less than forty years ago, the UK Gift Aid incentive aggrandizes donations received through select charities by providing tax deductions to the donor.

By means of Gift Aid, charities are able to reclaim the basic tax rate (20%) of the donation at no cost to the donor. For example, if an individual donates £10 using Gift Aid, the charity itself receives £12.50. With non-monetary contributions, the original tax is added back in to the overall value of the item. Thus, if a table valued at £100 is supplied, the charity is able to retain the item at £125.

However, before one is eligible to provide a Gift Aid donation, a form documenting basic personal information such as name, home address and information about the designated charity is required. Furthermore, this form is rather versatile in that it can be applied to future donations as well. On the surface, Gift Aid appears ingenious and innovative, and in many ways, it is. Yet, like many other programs wrought by good intentions, this incentive should be wary of also being susceptible to corruption.

For one, Gift Aid is plagued by complexity and ambiguity in its guidelines and operations.

Revenue and Customs declare that the donated items are in fact the possessions of the donor and the charity in question acts as a mere representative. Therefore, it is the donor — not the organization — who has the authority to not only give all or a portion of the sale’s proceeds but also to retain all or a portion of the profits. Meaning, an individual may decide to utilize Gift Aid out of greed and a personal, profit agenda rather than benevolence and an honest desire to give back to others.

The mandatory Gift Aid forms are composed in such a manner that donors are not held accountable for whether proceeds are bequeathed to the charity or not. Thus, an individual could legally sell his or her belongings using the Gift Aid incentive and keep all of the proceeds — leaving the charity, which handles the actual selling of the item, bereft of any profit.

According to the Institute of Fundraising, “the goods are the property of the owner until they are sold, and after they are sold, [the owner] has the right to keep some or all of the proceeds.” Although individuals who are initially willing to sell their personal belongings under Gift Aid may not initially expect to monetarily gain from the transaction.  Because this gaping loophole still exists, the incentive may be vulnerable, or opens an opportunity with the advantage, to misuse.

Phoebe Pradhan

Sources: HM Revenue and Customs, The Guardian
Photo: Vintage 3D