Ten years on from the introduction of automated Gift Aid in charity shops, Barry Gower highlights the ease with which this highly profitable scheme can be operated

In the Mid-October 2005 of Professional Fundraising I wrote an article on Gift Aid entitled Money from Nothing. In the article I noted that in 2005 CAF had estimated that some £800m was being lost through unclaimed Gift Aid. However, in the articled I maintained (and still do) that there is a lot more Gift Aid that charities could enjoy.

One of them in particular was Gift Aid from charity shops, now known as Retail Gift Aid. The charity sector are celebrating 10 years since the introduction of the first automated claim to HMRC from charity shops.

However, what I find more interesting is the fact that, while an automated system can be of great benefit, especially to larger charities with more sophisticated staff and equipment, the actual operation of Retail Gift Aid is incredibly simple.

Perhaps the first thing to bear in mind is that charity shops (apart from their sale of new goods) are not, in themselves, ‘shops’ in the true sense of the word. They are in fact ‘convertors of (donated) goods into cash’.  

So, if the donors retain ownership of the goods until such time as the goods have been converted into cash, and THEN make the donation, they would be donating cash, not goods, and so this could then qualify for Gift Aid.  

While this may sound a bit complicated, it is in fact quite straightforward.

Many shops that sell new goods (on which they need to charge VAT) manage to operate this quite simply. In essence it operates as follows:

• Donors wishing to participate in a charity’s Retail Gift Aid scheme register their details and Gift Aid Declaration with the charity.
• They receive an ID number which is used to identify their future donations.
• When they donate goods to the charity, these are tagged with their ID number.
• When the goods are sold, the tag is removed, and retained for further processing. (I recommend that it is placed in the till, because this is the simplest instruction for staff, and it is after all money!).
• The tag is then processed according to the Retail Gift Aid model being operated by the charity (Standard Method, Method A or Method B), together with the appropriate confirmation letters and waiting period.

The point about the scheme is that once a sale has been made of the goods donated to the charity shop under Retail Gift Aid, the resultant donation (as indicated by the tag that is now in the till) is effectively a cash donation from the donor of original goods (provided all the requirements have been complied with).

It can therefore now be processed in the same way as if the donor had sent in a cheque or other cash donation together with a Gift Aid Declaration. There is nothing very sophisticated or clever about the processes, and it is not necessary to have sophisticated barcoding or EPOS systems. It is of course necessary to ensure that, as with normal Gift Aid, all HMRC requirements have been met and properly documented.

When you look at it this way, there is no reason why any charity shop should be put off using Retail Gift Aid. It is as straightforward as using a different coloured price tag to indicate Gift Aid items, and remembering to remove and retain the price tag when the goods are sold. An easy and very profitable way to increase the value of the sales in your charity shop, wouldn’t you say?

Barry Gower is a specialist consultant in Gift Aid. He established GAIN The Gift Aid Consultancy in 2004, which offers a range of services to charities to improve their efficiencies and provide them with a measurable increase in income