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A baffling session on the value of Gift Aid

The Public Accounts Committee convened with its normal seriousness on Monday. The top bods of HM Revenue & Customs on one side; some political heavyweights on the other. The plan for the early part of the meeting was to conduct an investigation into whether Gift Aid had been effective at incentivising giving to charity.

Unfortunately, the plan went off the rails pretty early on.

About five minutes in, Margaret Hodge, the chair of the committee, asserted that the report showed that the value of tax reliefs had gone down in real terms. Lin Homer, chief executive of HMRC, said it didn’t show anything of the sort.

Yes it had, said Hodge. The NAO said so. There was a graph showing it.

No, said Homer. The graph didn’t show that. It showed a different set of tax reliefs which you couldn’t compare. From there, the meeting descended swiftly into baffling acrimony.

The problem, it quickly became clear, was that the real state of tax relief was so complicated no one really understood it. Well, HMRC might have understood it, but they were patently unable to explain it.

After a bit, the NAO representatives at the PAC got stuck in as well, insisting that their report was accurate. The HMRC officials said they didn’t dispute that it was accurate – just that it didn’t say what other people said it said.

So what was the real situation, Hodge demanded. What did HMRC think was going on?

No one had a clue, Homer said. No one had been checking. To find out how much effect tax relief had on giving, you had to know how many donations were given where the donor didn’t bother to claim tax relief. And HMRC wasn’t checking who didn’t claim Gift Aid.

“Right,” said Hodge, working herself into a fit of righteous asperity. “We’re going to hold this session in private for five minutes.”

And she threw everyone out. When everyone filed back in, the subject was swiftly changed, and nobody talked any more about whether tax relief was effective at growing giving. Certainly nobody talked about whether that is really what it’s for. Instead, we got onto the Cup Trust, and other abuse mechanisms, where at least both sides knew what was going on.

So we never did find out whether Gift Aid was good value for money when it came to increasing giving. Oh, well.

  • Helen Ashley Taylor

    I watched some of the early part of the PAC session from my computer. Was I the only accountant to find myself speaking assertively at my computer screen – in some vain hope of being heard perhaps – in trying to explain, for example, how corporate gift aid works in one sentence? It was sheer agony to watch. It was apparent within minutes that “they were patently unable to explain it” in the most basic of terms, as David Ainsworth points out. Oh please – whatever the arguments over HMRC and The Charity Commission – please PLEASE can we all be given the comfort that there are (and will continue to be) people in these organisations who understand and, importantly, can explain tax reliefs when required to do so. Better still, can we have people who can quickly spot and appreciate the bigger picture when charitable status is being exploited for a wide range of tax reliefs. Surely these are some of the basic first steps to get right at least when determining the way forward after recent scandals and NAO reports?