Government consults on reforms to payroll giving

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The Government has launched a consultation on proposals to reform payroll giving, in attempt to increase the amount donated to charity.

Payroll giving allows UK income-taxpayers to give regularly and on a tax-free basis to good causes. Donations are deducted from gross pay, so each £10 given costs a basic rate taxpayer only £8. But currently only 2% of employers offer payroll-giving schemes, with just 3% of employees donating.

HM Treasury is looking to simplify the scheme’s administration and make it easier for donors to give. In 2011-12, £118 million was donated by 735,000 people through payroll giving,

The Government’s proposals include:

  • introducing the provision of exit packs for when an employee stops giving via scheme, which includes materials to help them maintain a relationship with their chosen charity;
  • bringing in standardised forms to make sign-up for donors simpler;
  • reducing the processing time from 60 to 30 days to make sure charities get their donation faster; and
  • opening up the payroll-giving agency market to competition from non-charities to allow new entrants to invest in and improve the system.

Economic secretary to the Treasury Sajid Javid, said: “The scheme has real untapped potential, not just for raising money for charity directly, but also for starting a giving culture among those that do not normally donate.”

But Peter O’Hara, managing director of Workplace Giving UK, which runs payroll-giving schemes, believes the Government’s consultation was asking the wrong questions: “We regard yet another review with some scepticism given that previous reviews have resulted in little or no action. We are further disappointed that nowhere in the consultation is the employee/donor journey fully addressed – how does an employee even know if their employer offers a scheme?

“The mechanism of giving to charity from pay remains a simple proposal; however, we do not deny that given that the scheme was introduced over 25 years ago, it needs overhauling to encompass all new technologies and ways of giving.”

The consultation closes on 13 April 2013.

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