My Lords, I am very grateful to all those who have taken part in this short debate for their contributions and for their broad support for the objectives of the Bill. I have noted, and will touch on, some of the very helpful suggestions that have been made.
One of the questions was when there would be an opportunity to have another look at the scheme. All tax policy remains under constant review, and the scheme we are discussing is no exception. In addition, HMRC publishes a national statistics package every year, providing a wealth of data, including the total amounts claimed under the gift aid and small donations schemes. This transparent approach allows interested parties to monitor the take-up and effectiveness of charitable tax reliefs constantly. But all suggestions made during the debate will of course be looked at by the Ministers and officials who have responsibility for taking this important policy forward.
Quite a lot of the comments were focused on the link between the small donations scheme and gift aid. There are a number of arguments for nudging people towards gift aid wherever possible. First, the gift aid scheme is not cash limited, whereas the small donations scheme is, so the more people can put on the gift aid side, the more people will be outside the cap. Also, with gift aid the charity gets a list of the donors who support it, which obviously does not happen with the small donations scheme. There is also the issue of safeguards against fraud, which I shall come to in a moment.
On the issue of publicity for the scheme, a number of noble Lords commented on the fact that the take-up has not been as high as we, or they, would have wished. As I said, we will publish the scheme, and I take note of the comment by my noble friend Lord Hodgson that publicity should not come in brown envelopes marked “HMRC”, which strike terror into the hearts of most citizens. We should find a more user-friendly way of publicising details of the scheme.
A number of noble Lords suggested that the matching requirement might be dropped. This was raised during the review that the Government undertook. The matching rule was not identified as an issue in the vast majority of responses. Even the charity finance groups and the NCVO’s own call for evidence response acknowledged that only 5% of the charities that they surveyed claimed no gift aid, which does not wholly support the assertion that the matching rule is a significant barrier for most charities. The argument was also put forward that it was excessive and that one way around this would be to have a fixed amount. HMRC requires a regular
pattern of gift aid claims to be able to ensure that a charity is and continues to be compliant with the main gift aid scheme. It is a sort of proxy for compliance, having the link between the small donations scheme and gift aid. The organisations continuing compliance with gift aid and HMRC’s ability to check a number of claims is the closest proxy to help to assure compliance under the new scheme. Requiring a number of gift aid claims to be made, which includes the provision of donor declarations alongside claims for top-up payments, increases the protection against fraud and abuse, which I shall come on to in a moment.
The scheme is at risk from fraud. The Government believe that a matching requirement is an important anti-fraud element of the scheme. Even if a charity appears to be compliant for the first few years or with the first claim, changes in charity personnel can affect an organisation’s attitude to compliance, so HMRC will continue to need some evidence on which to base its assessment of the risk that the charity poses in relation to the scheme. There are some unfortunate examples of individuals exploiting charitable status for criminal purposes. In May this year three individuals were jailed for a total of 22 years for defrauding HMRC of £5 million in fictitious gift aid claims; in April three individuals were jailed for a total of 11 years for submitting fraudulent gift aid claims totalling £340,000; and in January two individuals were jailed for a total of five years for attempting to fraudulently claim £500,000 in gift aid from HMRC. This demonstrates that there is some risk of abuse in the scheme.
I was pressed by my noble friend Lord Hodgson to extend the gift aid small donations scheme to include other forms of payment—direct debits, cheques and credit card payments. The aim of the scheme is to allow charities and community amateur sports clubs to claim a gift aid-style payment on cash donations received in circumstances where it is difficult or impractical to collect donors’ details. Giving by cheque means that the donor is giving their details to the charity, and the extra amount of information needed to make a gift aid declaration is relatively small. If it is practical for a donor to write a cheque, it seems reasonable to assume that it is practical for the donor to make a gift aid declaration at the same time. When a charity has an ongoing relationship with a donor, you should use gift aid if at all possible.