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Gift Aid system at risk, says National Audit Office report

22 Nov 2013

A report from the National Audit Office (NAO) has revealed that the Gift Aid system was being exposed to criminals who falsified donations or set up fake charities.

HM Revenue and Customs (HMRC) said its ‘crude’ estimate of yearly tax lost was around £170m; either through fraud, avoidance or error.

Gift Aid is worth £1bn or 2% of UK charities’ income every year.  

The tax authority has been placing more emphasis on dealing with fraudulent claims since 2009, the report said. There are estimates that its work saved £63m in potential tax losses that were created from abuse of relief on donations in 2012/13 - a four-fold increase since 2009/10.

Previously, HMRC focused on processing Gift Aid claims efficiently so that charities would receive the money quickly.

A government spokesman said, ‘This is a longstanding relief and we want to make sure it keeps pace with changes in the way people donate. We have recently consulted with the sector on modernising Gift Aid and we work closely with charities to make it as easy as possible for them to claim tax relief.

‘However, it is important too that appropriate controls are in place’.