If you think Gift Aid is only for the likes of Oxfam, worth a few bob at most, too much hassle& then you could be missing out on pots of free money. David Dixon explains why.
Gift Aid has many advantages for arts organisations and almost no drawbacks. First, lets look at the positive features.
Free Money: through Gift Aid the Government offers your organisation a theoretically unlimited amount of additional money in a scheme that requires minimal paperwork. There are no restrictions on how you spend this handout and no targets to achieve. Whats more, if you havent claimed your share yet then you can make a backdated claim for the last five years as a windfall sum!
Incentive to give: believe it or not, the UKs Gift Aid rules offer donors a much higher tax break on donations than they receive in any other country, including the USA (in the case of higher level tax payers, 40% saving). Whether the donor passes on this benefit to you, or keeps it for themselves, it is still a major incentive to give.
Incentive to fundraise: a surprising number of arts organisations are still heavily reliant on corporate sponsorship, an area of fundraising that is becoming more difficult and where the return on investment (ROI) can be low when all costs are properly considered. Fundraising from individuals is straightforward and, once a programme is established, provides a good ROI. Gift Aid provides a much greater cash incentive than Arts & Business New Partners funding with fewer restrictions and rules.
Loyalty: the more relationships a customer/supporter has with an organisation, the more likely they are to stay loyal. An attender who is also a donor will stay involved for longer than one who is not, other things being equal. Asking for a Gift Aid declaration on qualifying payments is another mechanism for actively involving the supporter, and another reason for a dialogue. Loyalty equals more income at lower cost over time for you.
Database enhancement and data acquisition: Arts organisations tend not to think in terms of data acquisition and the value of a database, but they should. For many arts organisations (especially those that have ticketing software) their database is their single most valuable asset. For others (e.g. free museums) the absence of a database of supporters/attenders is a major impediment to marketing and fundraising. Acquiring a Gift Aid declaration is an excellent reason to get details to add a new record to a database or to add new information to a current record.
Monkey business
Numerous organisations offer great examples of how Gift Aid works in practice, including a zoo, which as a heritage organisation, was eligible to reclaim Gift Aid on almost all ticket income, providing they could get a Gift Aid declaration from customers. But this organisation sold tickets at the gate without capturing customer details, and its ticketing software could not cope. To avoid queues at the gate, clipboard staff were employed to walk around the zoo and ask visitors to make a declaration relating to the entrance fee they had just paid. Most agreed and the zoo was able to reclaim almost a quarter of a million pounds in Gift Aid each year against modest costs for the clipboard staff. The story does not end there! Over time the zoo collected the name and address details of tens of thousands of visitors through the Gift Aid declarations. It then began a polite and well-managed fundraising campaign using mail and phone. This fundraising effort, which would have been impossible without the Gift Aid database, is yielding around half a million pounds each year.
Tower power
Another good example involves the Tower of London (and its sister organisations, Hampton Court and Kensington Palace), for which The Phone Room Ltd handles all advance ticket sales by phone. Every caller is asked to make a Gift Aid declaration relating to their ticket payment and most do so (though not all are eligible, such as foreign visitors). This process is mirrored on the website and, where possible, with clipboard staff at the Tower. In this way they add almost one-third to much of the ticket income taken over the phone for no extra cost. How cool is that!
Windfall at the theatre
The process of releasing a Gift Aid windfall can be surprisingly simple. I recently visited a regional theatre to begin work on a new fundraising strategy and asked questions about an existing Friends scheme. Such schemes vary wildly from place to place in every aspect, including whether they qualify for Gift Aid (it depends on the benefits). In this case the scheme had no tangible benefits and the theatre could make an immediate claim for five years worth of Gift Aid on membership fees once it had secured retrospective Gift Aid declarations from members (the phone works best for this). For a small outlay the theatre will be able to reclaim around £6,000 from the HM Revenue and Customs this year and then around £1,200 each year from now on.
The heritage effect
When the government of John Major decided to tidy up tax breaks for donations in the early 1990s, it was made plain that benefits in exchange for gifts would not be allowed. This sent the National Trust running to the lobbies it had acquired millions of members on covenants (the old equivalent of Gift Aid), and they got free entry to NT properties in exchange for their gift. If this perk were removed they would lose literally millions of pounds and thousands of members. The government backed down and included a heritage exception in the legislation, which persists to this day.
Since then many other organisations, notably London Zoo, have walked through this loophole and Gordon Brown has now announced he will amend the law. From April 6 this year a ticket buyer must add a 10% donation to the ticket price so that the whole amount can qualify for Gift Aid; or alternatively, the ticket price must allow for 12 months free entry i.e. a membership (the National Trust effect in action again).
This led to groans from some heritage organisations that see a nice money-making scheme disappearing. I say they are wrong! The new scheme is a wonderful opportunity to get 10% more from many visitors whilst reclaiming tax on the original ticket price and on the new top-up. Suddenly you have extra income, a database of donors and the basis for a new fundraising programme. Sure, you will have to do a bit of work for it (we call it fundraising) but the extra income will far outweigh the costs if you do it consistently and efficiently. Visitors have a value that Gift Aid can help unlock.
David Dixon is Director of DixonRaines and of The Phone Room Ltd.
t: 07799 066304;
e: david.dixon@dixonraines.com;
w: http://www.dixonraines.com