Lessons learned during the pandemic could improve long-term resilience, writes Catriona Finnie
Charity sector organisations continue to struggle with the impact of Covid-19, affected in different ways by the pandemic and its accompanying lockdown. A number of health-focused charities have seen demands for their services increase while those which operate in the arts and culture sector, such as museums, galleries and theatres, have seen their income diminish as they’ve been forced to close their doors to the public.
The pandemic has been financially devastating for the sector with the latest research showing charities are on average having to plan for a 24% loss to their total income for the year ahead. Many third sector organisations are now taking a proactive approach by launching emergency fundraising campaigns or contacting existing donors to request additional financial support.
Last month, a coalition of leading voices in the UK charity sector put an imaginative proposal to the UK Government requesting a temporary increase in the amount that can be claimed via Gift Aid and the Gift Aid Small Donations Scheme (GASDS). Under their plans, the effective tax rate used in Gift Aid relief calculations would be increased from 20 to 25%. That would mean a £100 donation from a UK taxpayer would increase from £125 to £133.33 for the charity once Gift Aid had been claimed.
The coalition has also asked the government to increase the GASDS limit from £8K to £10K and remove the scheme’s matching rule. That would mean the amount that can be reclaimed through the GASDS is no longer linked to the amount reclaimed through Gift Aid.
It’s hoped the government will look favourably on these plans which would benefit the wider sector at a time of crisis.
At present, the rate increase would only benefit those charities that make Gift Aid reclaims but, possibly in anticipation of seeing a rise in the amount of relief, this field is starting to widen. Some smaller charities, which have never claimed Gift Aid before, are now running funding campaigns to ensure they are able to access it. This includes signing up for and submitting reclaims and actively promoting Gift Aid through current donors.
In addition to these sensible proposals, there are other encouraging developments under way that are helping support many hard-pressed charities.
We are seeing several organisations which provide grant funding to third sector groups coming forward to offer help, with some allowing charities to use the grants for different purposes than they were originally given. Some of these funders are also allowing automatic funding extensions or providing additional grants to get charities through the worst of this period.
While it’s impossible to predict the ultimate affect that Covid-19 will have upon the sector, there’s little doubt that it will continue to have an adverse impact for the foreseeable future. Public facing charities, such as theatres, museums and galleries, will likely be limited to admitting fewer visitors for many months to come once they are all eventually allowed to re-open. Those which rely on donations may see a drop in this income, especially at a time of economic adversity where large numbers of redundancies are anticipated as well as anticipated decreases to public sector derived funding. Even many charities that have investments will have seen a drop in returns with wider uncertainty around these income streams.
It is, however, positive to see many third sector organisations rising to the occasion and reviewing their activities to determine where they might change or diversify their operations. While this can be a painful process for some, it could also ensure that many charities will be more efficient and effective for the future and better placed for the longer term.
This proactive thinking coupled with further government support will be essential as the third sector continues to weather through this pandemic.
Catriona Finnie is a Gift Aid specialist at accountants Chiene + Tait
