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Let me begin by declaring an interest. Until relatively recently I was a trustee of two charities registered in Scotland and I remain a trustee of the Parliament Choir, which also has charitable status.
I acknowledge the progress made on the Bill in Committee and the steps people have made across the House to come up with constructive solutions to the acknowledged weaknesses of the legislation in its original form. I hope the Minister will take on board some of this evening’s amendments, not least the two in my name in this group—amendment 32 and the consequential amendment 33. My amendments are designed to provide a mechanism to allow smaller and project-specific charities to benefit from gift aid top-up payments without having to have made a successful gift aid exemption claim in three of the last seven years, or two of the last four—I am conscious that the Government have tabled an amendment to improve that part of the legislation. For the sake of clarity and simplicity, I propose that a “small charity” be defined as one with a gross annual income of £25,000 or less. As with other amendments in the group, the aim is to bring more small charities within the ambit of the legislation, which is a shared aim across the House this evening.
The reason I urge the Government to look closely at my amendments is simply that smaller charities often do not benefit from gift aid, and in some cases do not even register for it. The very charities that this Bill is intended to benefit are among those that are least likely to be registered for gift aid or to have claimed it regularly even when they are. As the proposals stand, an eligible charity has to have been registered with Her Majesty’s Revenue and Customs for a minimum of three years, made a gift aid claim in three of the past seven years, and not had a penalty imposed in making a gift aid claim. We know that around 100,000 organisations are registered with HMRC for gift aid, but only 65,000 claim each year, which is a significant gap. They include not just general charities, but excepted charities, such as churches, exempt charities, such as museums and foundation schools, and community amateur sports clubs. At the moment, many small charities are not registered with HMRC and do not have a three-year track record of making gift aid claims, which particularly affects charities run solely by volunteers—those that do not have professional staff, including fundraisers, or the time and resources that other, more professionalised charities do. Such charities are often involved in the very projects that attract the largest active community involvement and support, which in my view are exactly the sorts of activities that we should use the Bill to incentivise in our civil society.
Notwithstanding the proposal to decrease the three-year registration period, any time limit will mean that charities engaged in short-term or fixed-term fundraising will have little incentive to register for gift aid with a view to taking part in the new scheme. Whether it is fundraising to replace the windows in a listed community building or raising funds for special equipment for a disabled youngster, any one-off projects raising relatively modest sums of money over a short period will find it difficult and unduly cumbersome to benefit from the scheme. Even the Government amendments this evening will not meet the needs of short-term appeals. Indeed, charities that receive only cash donations and do not fundraise in other ways will have no opportunity to claim gift aid even if they would like to.
Although I fully accept that any definition of a “small charity” will be to some extent arbitrary, I want to explain to the House why I have suggested £25,000 as an income level and assure Members that I did not just pluck that number out of the air. It is already the threshold that the Office of the Scottish Charity Regulator uses for the treatment of smaller charities in reporting and monitoring. There is a recognition that reporting and monitoring need to be commensurate with the size of an organisation, and the burden of compliance needs to be proportionate too. Charities with an income below £25,000 per annum have to submit an annual return, but do not have to submit the supplementary monitoring returns and annual accounts required by larger organisations.
Similarly, in England and Wales, the Charities Act 2011 contains numerous mentions of “lower-income charities”, which are for the most part—but not exclusively—defined as having a gross income of £25,000 or lower. That definition is used to determine the requirements for auditing and annual reporting—for instance, in part 8 of the 2011 Act, which deals with charity accounts, reports and returns. As the registration of charities has not commenced in Northern Ireland, the situation is somewhat different there, but there are nevertheless distinctions drawn between very large and smaller charitable organisations. As the greatest risk that needs to be managed in this Bill is the potential for fraud, defining a “small charity” in a way that is consistent with the accountability practices and processes already in use by charity regulators would be a useful step forward.
Before I conclude, I want to pick up a point that Cathy Jamieson made about connected charities. As someone who represents a rural constituency, I absolutely concur with what was said earlier. In rural communities, the trustees of the local village hall will often be drawn from the trustees of the various groups that use it. There is every likelihood that the same people or their spouses will appear on the Kirk session, and they might well be on the school-parent council too. Therefore, the cohesiveness of those small communities—where some people are extremely active in a range of activities and where a lot of entertainment is very much home grown and home run—will potentially be affected. I urge the Minister to look carefully at how the Bill’s important safeguards will play out in remote rural communities, where such cohesiveness is still very much part of the fabric of daily life.
To put this debate in context, 60% of all charities active in Scotland—around 14,000—have a gross annual income of less than £25,000, with almost 9,000 having an income of under £5,000 a year, more than 2,000 whose income is between £5,000 and £10,000, and just over 3,000 with a gross annual income of between £10,000 and £25,000. Those smaller charities represent a disproportionate number of charitable organisations, with 47% of all charities in Scotland—almost half—having a gross income of less than £10,000 a year. Published information from the Charity Commission shows a similar picture in England. In June 2010, there were 73,000 registered charities in England and Wales with an income of less than £10,000, representing 45% of the sector. Given those proportions, it is incumbent on all of us to look at how we can strengthen the Bill for the smallest charities and ensure that they are able to benefit from the legislation, as was originally intended. According to the National Audit Office, 67% of the charities across the UK generate only 1.4% of charitable income. Let us bear it in mind that the Bill is supposed to support those smaller charities. I urge the Government to look carefully at the amendments tabled by Members on the Opposition Benches, including amendment 32.