tiintax

Dear Mr Jones

This is an individual’s response and is also posted online (with commentary) at https://tiintax.com/.

First, you may be aware that I have already written to the Consultation Coordinator and to BIS to say that I think this consultation document is technically defective as it doesn’t contain an adequate impact assessment (it contains the outline of what the change is, but no estimate of the costs, benefits and impacts of making such a change).  I invite you to publish such an estimate and to extend the consultation long enough for the third sector to have the opportunity to examine your estimates adequately in accordance with the government’s Code of Practice on Consultation, the Tax Consultation Framework, and the Impact Assessment guidance.

Turning to the content of the consultation, I first of all have to reject the assumption behind the policy objective that it is “disproportionately burdensome” to collect gift aid details from people attending a religious service.  Indeed, the system is so well bedded in that when I attended the funeral of an elderly friend a few weeks ago the Minister announced that it had been her last wish that people would not only donate to the church instead of sending flowers but that they should do so via the envelopes at the back of the church so that gift aid could be reclaimed on all the donations!  It is my experience as an occasional churchgoer and attender at cultural and other events that everyone knows you have to tick the box and fill in the gift aid declaration, and that “sticking it to the government” by doing so is often part of the pleasure of so giving.  Indeed I answered a Radio 4 Woman’s Hour appeal to donate some old bras to Oxfam last week and made sure to complete the gift aid sticker and add it to the package so that they could reclaim the gift aid on anything they raised from the disposal.  Sorry, but the idea it’s burdensome for charities to operate Gift Aid just won’t wash as far as I, as a small scale donor, can see.

Having broken the link between the donor and the donor’s tax in the way you describe in the section on Policy Design Considerations you then have to introduce a burdensome set of anti-avoidance regulations to ensure that the charity is actually collecting money from the public (and not just turning £x into £x+y via the magic of government funding) and not turning itself into a hundred daughter charities that can collect £5000 each – but also that the charities which are already daughter charities of a larger entity can’t go “ha ha we win!” and profit from their accidental advantage.  It’s a mess.

You say, however, that these design issues are fixed and not open to consultation, which is rather unhelpful.  Looking at the areas which ARE open to consultation, then, you seem to be trying to find a simple way of having the government top up charity cash collections without opening the floodgates to anyone to apply.  I agree that to tie the top up to an existing good record of making gift aid claims is sensible, but the attempt to get around the daughter charities/single charity with lots of locations avoidance issue via buildings is doomed.  You give (on page 19) three examples of how you think tying the top up to buildings might work:

• example 5, lots of local groups in separate buildings are entitled to “up to” £255,000 – 50 groups at £5000 each
• example 6, one local group in one building is entitled to up to £5000
• example 7, a national charity with 1000 charity shops is still entitled only to the £5000 because no qualifying activity happens at the shops.

Well, I may only be a retired tax inspector but I can see clearly that if I were a national charity with a string of charity shops I’d pretty much start running qualifying activities in them right now so as to be ready to claim the full 1000x£5000 when the scheme is in force!  I’d suggest the third sector starts now, declaring the first Monday in every other month as “GASDS day”, carefully reading the small print in paragraph 5.16 to make sure they have at least 10 group members present on at least six occasions in the year and that the events are open to the public and include a small change collection…

It’s an absurd and unworkable design.  Much simpler, fairer, and in keeping with the spirit of the policy objective would be to simply top up any charity’s gift aid claim by a flat rate figure each year.  That seems to be effectively what’s going to happen, you’re just going to make the charities go through a lot of hoops (and stress, and paperwork) in order to achieve the same result.

I suspect the reasoning behind not doing this is that it would involve giving too much money away, so I have a simpler proposal yet: don’t do it!  Improve the Gift Aid scheme instead, by retaining the link between donors gifts and the amount the charity receives, but breaking the link between the donors’ TAX and the amount the charity receives.

Here’s an example.  My late father used to give regularly to the church where he worshipped.  When he retired he increased his donation, but when he came to complete his next tax return he had donated more than the tax he had paid and so was made to pay over an amount equivalent to the tax reclaimed by the church.  Yet when I gave to charity, as a higher rate payer, I was able to reclaim the difference between the tax I had paid on the amount donated and the amount the charity had claimed back on it!  Simply abolish the link between the donor’s tax and the gift aid, and otherwise let the system carry on as now.  So people who give out of their meagre pensions can carry on doing so without fear of finding they’re being personally penalised by the taxman for so doing, and people who give from abundance can carry on giving, and charities can carry on reclaiming the standard rate of tax they have paid – but no individual personally benefits from charitable by getting a repayment.

I’d like to see an impact assessment of designing the scheme like that.  But then, as I’ve said, I’d also like to see an impact assessment of doing what you propose in the document.  I rather suspect the reason you haven’t published one so far is that the policy design includes so many complexities that it’s nigh on impossible TO cost, which suggests to me it’s a bad idea.  Sorry and all that.

Anyone fancy a bit of light Judicial Review?  I’m not seriously suggesting anyone will want to apply for a judicial review of the Gift Aid Small Donations Scheme consultation (not least because the interested parties – charities – are likely to receive more money than otherwise from its introduction) but I think they could if they wanted to.  Why, do I hear you ask? Because I don’t think it fulfils the legitimate expectation of including what the government has said will be contained in a consultation.

I retired from HMRC at the end of March and my last job title was Impact Assessment Coordinator, so what leaps out to me from this consultation is, well, the impact assessment.  Let me explain.

If the government

• does something regulatory
• which affects businesses or charities
• then they are committed to doing an impact assessment
• which contains the costs and benefits of the change.
• Unless it’s a tax measure, in which case the impact assessment is in the Tax Impact Assessment

Hmm.

Let’s have a look at the Gift Aid Small Donations Scheme consultation.

First: is it regulatory? The definition of regulation (no, seriously) is on page 19 here and includes:

 A rule with which failure to comply would result in coming into conflict with the law or being ineligible for funding and other applied for schemes

Since this is about the rules under which charities would be eligible for this gift aid funding then, yes, it falls within the “regulatory” definition.

Second: does it affect charities – er, yes.

Third: is there an impact assessment….

well that’s where it starts to get interesting.  There’s a chapter in the consultation document which is headed “impact assessment” (Chapter 6 on page 27) but when you turn to it, it’s obviously not an Impact Assessment.  Normal Impact Assessments (“IAs”) are set out on a form (you can find it here if you really want).  No, this looks a lot like a TIIN, a Tax Information and Impact Note, like these ones here.

Except, well, there are lots and lots of rules about what has to go in an IA and what it will look like.  And the government hasn’t published any of the standards it will apply to the Tax Impact Assessment process… except that when he introduced the process, David Gauke said “This new tailored tax impact assessment process will be used throughout the development of tax and NICs policy and will be summarised in tax information and impact notes”

So, yes, in my view there’s a legitimate expectation that there will be a tax impact assessment with a formal tax consultation document like this, and this one doesn’t qualify because it doesn’t give the basic data you need in any kind of IA – what are the costs, benefits and other impacts and unintended consequences of the proposal.

I’ll be responding to the consultation itself over the next few days, but in the meantime here’s what I sent the HMRC consultation coordinator about the format of the consultation.  Again, feel free to adapt and use if you want to respond yourselves.

Dear Amy

I am writing to you about the Gift Aid Small Donations Scheme consultation to say that I think this consultation may be defective in that it doesn’t include an adequate impact assessment.  This is an individual’s response and is also posted online (with commentary) at http://tiintax.com/.

You will know that the government’s Code of Practice on consultations says that “Estimates of the costs and benefits of the policy options under consideration should normally form an integral part of consultation exercises, setting out the Government’s current understanding of these costs and benefits.” and that the Tax Consultation Framework additionally promises that, at each stage of the consultation, government will set out “its current assessment of the impacts of the proposed change and seek to engage with interested parties on this analysis.”

I see that the consultation document has a chapter headed “Impact Assessment” but it merely sets out the description of the proposal, using the headings

• Who is likely to be affected?
• General description of the measure
• What are the policy objectives and the intended effects?
• Background to the measure
• Detailed proposal
• Operative date

These are, of course, the scene-setting elements of a TIIN, explaining what the proposal that is being considered IS – but the impact assessment chapter omits the elements of a TIIN which are designed to show what the IMPACTS of the action will be:

• Exchequer impact
• Economic impact
• Impact on individuals and households
• Equalities impacts
• Impact on businesses and the third sector
• Impact on the public sector
• Other impacts
• Monitoring and evaluation

I cannot see that a proper consideration of the proposal can be undertaken without some understanding of how much money is being talked about, what will be the likely administrative cost to charities of claiming it, what will be the cost to HMRC of administering the scheme and, of course, a consideration of the statutory equalities impacts and of any unintended consequences.  It seems to me that the consultation is defective because it does not contain these necessary estimates – surely these are exactly the issues on which the department should be engaging with the charities sector to understand the possible impacts?

You will see that I suggest in my blog that the consultation would be vulnerable to judicial review and I would suggest that, as consultation coordinator, you might want to bring this to the attention of your policy colleagues and ask them to extend the consultation deadline and publish a supplementary chapter containing the information that the government has promised to include with its consultations, ie its best estimates of the costs, benefits and other impacts.

Kind regards

I see that the consultation tracker has been updated to show that the pasty tax consultation is now open for comments till 18 May and not, as previously advertised, till May 4.

I wonder why… 😉