The Gift Aid system, which was first introduced in the Finance Act 1990, has long been considered as over complex and in need of reform. To this end, the Government recently announced that proposals for changes to the way in which Gift Aid operates should be finalised by 30 September 2010.
Whilst umbrella bodies and officials have expressed their support for the reform timetable, others are concerned that little actual progress will be made during an election year. That said, it is generally accepted that changes made to Gift Aid, payroll giving and share giving must be well considered and developed rather than rushed through.
There are further concerns that the Government’s definition of ‘simplification’ may mean higher taxes and charity leaders have expressed anger over the comment by Economic Secretary to the Treasury, Ian Pearson, that any changes needed to be cost neutral. Shadow Charities Minister Nick Hurd said that if the Conservative party were to win the election, it would concentrate on trying to reduce the 'bureaucratic burden' of Gift Aid and favoured a composite rate, rather than an opt-out system.
The consensus among sector representatives is that reform will not occur for a considerable amount of time to come, which creates a question as to what will happen when the current arrangements come to an end in April 2011. The current transitional reforms were introduced in 2008, in line with the reduction in the basic rate of income tax from 22 per cent to 20 per cent, and cover donations made up to 6 April 2011.
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