Last month I illustrated the importance of our regular giving to our churches. This appears in accounts as unrestricted planned giving, tax recovered, collections and non-specific donations. In the last three years these together have averaged 61% of all PCC income, a ratio which we termed the Giving Ratio. In a table, I showed how this ratio varied between parishes where we noted that 10% of parishes had giving ratios of 40% or less whilst 19% had giving ratios exceeding 80%. In fact roughly a third of parishes rely on regular giving for at least three-quarters of their income - of which Gift Aid will be a very significant proportion.
There are significant changes to the tax recovery amounts which will be available from April 5th next year. In 2008, when the basic rate of tax was reduced from 22% to 20%, charities were compensated for a period of three years by “transitional relief” so there was no impact on the amounts of tax recovered. With the new basic tax rate of 20%, for every £1 given by Gift Aid, 25p can be claimed from the taxman, although for three years the taxman has added a further 3p to this making a total of 28p. This relief now ceases on 5th April 2011.
So what will the impact on PCC finances be, especially for the third of parishes where giving makes up three-quarters or more of the total income? Based on the results for the last three years the tax-recovery from unrestricted Gift Aid is likely to reach £3m this year, so a reduction in the tax recovery rate from 28p to 25p in the £ is likely to reduce tax-recovery by about £320k in a full year or £240k next year where the change applies only from month four. On average £240k represents slightly under 1% of all PCC income so the impact, although worrying, should be manageable. However for the third of parishes I’ve already mentioned where Gift Aid is more significant, the full-year impact will be about 1.5%. For a few parishes this percentage may reach 2.5% or perhaps slightly more.
For parishes not so dependant on regular giving there are other changes which need to be watched carefully. If their other income is derived mainly from investments there will have been a decline in this income as interest rates have moved downwards and the Parish Finance Officer reports requests for advice from parish treasurers about the use of fixed-term deposits with higher rates of interest. Of course this also applies to individuals, particularly the retired who have relied on investment income to augment their pensions, and to the diocese as it looks for the best place to deposit its liquid reserves.
The Parish Finance Office (01245 294430) is able to provide much valuable advice on Gift Aid and how to safeguard and improve this source of income.
Canon Don Cardy
1st Oct 2010