With the war taking place in Ukraine, thousands of people in the UK have made donations of clothing, bedding and medical supplies, whilst others have donated through UK charities.
With over 3 million Ukrainians already fleeing their country because of the conflict and crossing over into Poland and neighbouring countries, the effects on both the refugees and countries that are hosting them are potentially devastating.
Many UK charities are accepting donations through their websites. The United Nations Refugee Agency (‘UNHCR’), for example, is accepting donations through www.unhcr.org/donate and promises that 84% of the donation goes to fund activities in the field, reaching those that need it.
But there are less credible agencies that use a higher percentage of the donation on ‘administration costs,’ and, unfortunately there are people and organisations that will take advantage of the crisis to defraud donations under the guise ofthe crisis.
What, then, is the best way to support the efforts to keep the affected population safe and protected as well as ensuring your donation gets to the where you want it?
One effective and safe way to donate to support victims of the conflict is through the Disasters Emergency Committee (‘DEC’). This is an organisation that brings together 15 leading aid charities in the UK. The DEC raises funds quickly and efficiently at times of crisis overseas.
The DEC’s website states:
“Pooling our resources to work as one, we are pivotal in co-ordinating the UK public's response to overseas disasters. In collaboration with our Rapid Response Network of national media and corporate partners, we raise the alarm to the UK public and set up easy ways to donate.”
Members of the DEC include Action Aid, Plan International, Oxfam, Christian Aid, Islamic Relief and the British Red Cross to name a few. The DEC is funded by the member charities. The DEC then distributes all of the donations it receives to the member charities. The co-ordinated effort means donations can be raised quickly and distributed efficiently.
The downside, however, of making a donation to a charity through their website is it takes time and expense for charities to recover Gift Aid. Gift Aid allows UK charities to claim back the basic rate tax already paid on donations by the donor. This means that donations are boosted by an additional 25%. The charity can claim back 25 pence from the Government, for every £1 donated.
Whilst this is an effective way of boosting donations, it's costly in terms of administration time as well as the time it takes for the charity to receive the payment. Gift Aid only allows charities to claim 25% on top of the donation, which means they are not able to capitalise on all of the tax relief that is available on donations made by higher rate taxpayers.
Is there a more tax efficient way to make a donation to support efforts in Ukraine?
The simple answer is ‘Yes.’ Payroll Giving, also known as ‘Give as you earn,’ (‘GAYE’) is a system that is offered by over 8,500 employers in the UK. Payroll Giving enables employees to make a charitable donation – either one-off or on a regular basis – to a charity of charities of their choice. Charitable donations are deducted direct from gross salary, after National Insurance contributions (‘NIC’), but before tax has been deducted.
Making the donation direct from gross salary means that tax relief is immediately available on the donation.
The amount of tax relief that applies depends on the employee’s tax band. For example, when charities receive a donation from a basic rate taxpayer, they will see the value of the donation increase by 20%. When a higher rate taxpayer makes a donation through Payroll Giving, the charity will see the value of the donation increase by 40%, which is a significantly higher amount than standard Gift Aid of 25%.
Another benefit to the charity of receiving a donation through Payroll Giving is that tax relief is applied immediately and automatically. This saves the charity time and money on administration costs to recover Gift Aid.
Payroll Giving in Action (‘PGA’) is an organisation that works with employers across the UK to achieve their Payroll Giving aims and to encourage employees to join Payroll Giving schemes. In 25 years as a professional fundraising organisation, more than £2 billion has been donated through Payroll Giving by over 1 million PAYE employees.
Payroll in Action has recently updated their 'Charities by Sector' page to include fundraising specifically for Ukraine. On it, there are 11 charities who are set up to receive donations through Payroll Giving. These include Oxfam, Medecins Sans Frontieres (Doctors Without Borders UK) and Care. The full list can be found here.
How does PayCaptain help?
PayCaptain has a Payroll Giving scheme built into the application which makes it quick and easy for the employee to make donations direct from their gross pay to the charity or charities of their choice. Charitable donations can be made either as a one-off donation or a regular payment, administered by PayCaptain. Within the solution there is also the option for employers to match their employees’ donations.
In summary, making a donation direct from payroll through Payroll Giving is a quick, effective and a tax efficient way to make a donation to support the humanitarian crisis in Ukraine.
Donors can make one-off or regular donations, which will be less cost to them in real terms because the donation is made before tax is deducted.
Charities benefit as tax relief is applicable to the donations based on the rate of tax that the employee pays, which increases the value of the donations that they receive. Costs for administration for donations made through Payroll Giving is also reduced, because the relief is applied immediately and automatically. This means that more money goes to where it's needed, to support those in crisis.
To learn more about how PayCaptain can help your business, contact us for an informal, no-obligation chat. We’ll be happy to demo PayCaptain for you.
To learn more about Payroll Giving, click here.
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