2011-12 Fundraising and Funds Dissemination process/WMF staff memo/Appendix D

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Gift Aid[edit]

Wikimedia UK, through Chris Keating, provided the following background on Gift Aid in an email to WMF. Chris was kind enough to allow us to set it out here.

What is Gift Aid?[edit]

Tax-deductibility of donations works a little differently in the UK to most countries. In most jurisdictions, tax-deductibility means that the donor receives a tax receipt and presents it to the tax authorities to reduce their tax bill. In the UK, Gift Aid means that donors can instead make a declaration to the charity they have donated to, which enables the charity to claim back the basic (20%) rate of income tax paid on the donation. The charity can claim this money direct from the tax authorities, any time up to 4 years after the donation was made. The effect of this is to increase the value of donations which are subject to Gift Aid by 25%. (Donors who pay income tax at the higher rates (40% or 50%) can still claim back the additional tax through their tax return, in a more normal way).

How many people claim Gift Aid?[edit]

In 2010/11 42% of donors, on the whole, used Gift Aid (NCVO/CAF UK Giving 2011, p. 16 https://www.cafonline.org/pdf/UK_Giving_2011_Full_Rep.pdf ), with donors who gave less than £10 a month to charity being less likely to use Gift Aid, and those giving £10 or more each month more likely to use Gift Aid. However, this is a very high-level average, across all sectors and donation channels, and is not a good guide to any particular situation. For any particular charity the Gift Aid potential is determined by;

  • The proportion of donors who pay Income Tax (Income Tax applies to incomes over £6,475, so many students, and people who rely on state pensions or unemployment benefits do not pay it; nor do people whose income is overseas).
  • The proportion of eligible donors who make Gift Aid declarations. This depends on how easy you make it to make a declaration at the time someone makes a donation.

What was Wikimedia UK's experience of Gift Aid in the 2011 fundraiser?[edit]

Of a total of £873,000 donated online, we estimate that we will be able to claim about £87,000 in Gift Aid. This is equivalent to receiving Gift Aid declarations on 40% on our online donations. There was considerable variability within the fundraiser, and with learnings form this fundraiser taken into account, we expect to be able to get a higher proportion of Gift Aid in future. (These numbers are still provisional. We have not yet submitted the Gift Aid claim to HMRC (the tax authority) and will need to take a lot of care over reconciling Gift Aid declarations received with donations received. A final number will need to wait for that process to be completed.)

We became a charity (and hence eligible for Gift Aid) on 3 November 2011. This was very shortly before the beginning of the fundraiser and so there was only time to set up a basic Gift Aid declaration (http://donate.wikimedia.org.uk/thanks-gift-aid).

This declaration page was set up as the completion page for PayPal donations, i.e. the page to which donors were sent after making their donation. This process produced Gift Aid declarations for about 40% of PayPal donations. There was no equivalent completion page for our Direct Debit donations (via SmartDebit) and so we emailed all Direct Debit donors giving them a link to the Gift Aid page, which was producing Gift Aid declarations for about 20% of Direct Debit donors.

During the Fundraiser, we tested improved Gift Aid declaration formats. After checking with HMRC (the tax authority) we tried, on 9 December, a donation page which gave the donor an easy check-box at the time they chose to make their donation. https://wikimediafoundation.org/wiki/L11_1209_WMUK_GiftAid/GB This resulted in Gift Aid declarations from 61.7% of Paypal donations and 66.4% of Direct Debit donations, with no reduction in donations, so we adopted it immediately for the rest of the fundraiser.

We did a further test of putting the Gift Aid checkbox above the "donate" button, as here: http://wikimediafoundation.org/wiki/L11_1128_WMUK_JimmyB/GB This resulted in a higher proportion of Gift Aid declarations being received (76.3% of Paypal donations and 81.6% of Direct Debit donations) but reduced the number of donations received, so we did not roll it out.

The other donation channels we used in the 2011 fundraiser did not get as much Gift Aid; Large gifts - we received £40,000 in income from two large gifts (over £5,000); these were both from corporate bank accounts so not subject to Gift Aid. Text giving - we received £3,000 in SMS donations. We did not receive Gift Aid declarations for any of this. Offline gifts - we received a certain number of Gift Aid declarations for the £10,000 or so in small offline donations, but not as high a proportion as for online gifts.

What are expectations for future fundraisers?[edit]

If we simply repeated the best procedures we used in the 2011 fundraiser, we would expect to get uptake of Gift Aid declarations at around 60-65%, i.e. better than what we did on the whole in 2011. [Ed. A 60% uptake this year means that the value fo Gift Aid on the donations UK received this year would have been about £130,000.] For most of the 2011 fundraiser we were not using an optimised process to get Gift Aid declarations. There are also a number of process improvements which we can make in future fundraisers. We may be able to use these to get towards the 75-80% uptake we saw at the maximum.

  1. Test more donation form layouts to try to get higher uptake of Gift Aid without suppressing gifts.
  2. There is a Gift Aid module for CiviCRM in development. We are considering supporting this, which will streamline the back-office processes involved.
  3. Gift Aid declarations can be retrospective, so we could (say) email people now, or during the 2012 fundraiser, and get a Gift Aid declaration which applies to donations made in 2011.