For over twenty years, HM Revenue and Customs has quietly been running one of the UK’s most effective and unheralded grant programmes. Since the early 2000s, HMRC has been awarding funding to voluntary, community and charitable groups.
The original aim of the programme was to help customers who might need a helping hand in meeting their tax responsibilities and claiming the right benefits. What started as a small effort to close the gap between complex systems and the most vulnerable taxpayers has now become HMRC’s Voluntary and Community Sector Grant Funding Programme, a well-oiled machine that pumps millions of pounds of support every year to the organisations on the ground making a difference in people’s lives.
Let’s take a look inside the policy at HMRC to see how the programme works, what it does, and what impact it makes to communities in the UK.
The Background: Why HMRC Funded the Voluntary Sector
The story of HMRC’s grant funding programme starts with the realisation that not all citizens are in an equal position to deal with the government. In the late 1990s and early 2000s, it became increasingly clear to policy makers that as government services moved online and the tax credit system started to take shape, certain groups of the population were being left behind. This group included older people, disabled people, people with language barriers, and people experiencing homelessness. In short, the people least likely to have an intermediary standing between themselves and HMRC. Tax credits were also seen as an area that the programme could help with, as the system, while intended to support working families and combat child poverty, was notoriously difficult to claim.
HMRC decided rather than try to build up all the supporting services itself that it would work with voluntary and community sector organisations who were already working with those communities. There was an implicit acknowledgement that often an outreach worker, a benefits advisor, a local charity volunteer or community representative will have a better connection with those in need than a government department sitting at arm’s length from their lives.
The programme was formalised in the early 2000s with the main focus being on helping people to claim tax credits, a focus that would shift over time as HMRC’s remit and the benefits landscape changed.
How the HMRC Grant Funding Programme Works
HMRC’s Voluntary and Community Sector Grant Funding Programme is awarded on a competitive application process, usually in multi-year funding cycles. The current programme is the latest evolution of a twenty-year old approach, building on lessons learned from previous iterations to fine-tune eligibility criteria and monitoring frameworks.
Eligibility and Applications
Eligibility for HMRC grant funding is usually restricted to charities, community interest companies (CICs) and other not-for-profit entities. Applicants must demonstrate a track record of working with communities that experience barriers in engaging with HMRC and have evidence of their capability to deliver on the proposed work.
The application process requires organisations to explain how their work supports HMRC’s strategic aims, currently framed around helping people to get their tax right, to claim the benefits and reliefs they’re entitled to and to understand their responsibilities. Detailed project plans, budgets and organisational capability evidence are required as part of the application.
Over time, as the voluntary sector has professionalised and government funders have sharpened their expectations, more and more successful applicants have chosen to invest in dedicated charity systems and nonprofit CRM platforms to manage their activity. In an environment where HMRC like most government funders want assurance that every pound is spent and impact can be demonstrated in detail, having systematic approaches to service delivery, outcome tracking and beneficiary management have become table stakes in successful grant applications.
Priority Areas and Themes
In line with the HMRC strategic focus, the programme typically sets out a number of priority areas that reflect both HMRC’s operational challenges and broader government policy objectives. In recent funding rounds, these have included:
- Support for people claiming Universal Credit and other benefits that link to the tax system
- Support for self-employed people and small businesses who may struggle with their tax responsibilities
- Support for older people who are navigating pension taxation and age-related allowances
- Support for disabled people claiming disability-related benefits and tax reliefs
- Support for ethnic minority communities with language barriers
- Support for people in financial hardship or crisis
- Support for young people entering the workforce and tax system for the first time.
These priority areas recognise that there are many different communities facing different challenges in engaging with HMRC. The programme seeks to support a range of approaches to meet these needs, from one-to-one advice to community workshops, from telephone helplines to digital support interventions.
Grant Values and Timelines
Grant values vary widely, depending on the scale and reach of the proposed activities. A small, locally focused charity or community group might expect to win a grant of £20,000-£50,000 per year, whilst a larger, national charity operating services across multiple areas might win funding worth hundreds of thousands of pounds.
Typically, recent funding rounds have awarded grants for two to three years, giving organisations the stability to recruit and train staff and develop sustainable services, a marked improvement over the early years of the programme when annual funding cycles made it difficult for organisations to plan ahead.
What difference has the programme made?
Twenty five years on from HMRC’s initial foray into the world of grant funding, what has this programme achieved? How has it improved access to services for people? In a word; substantially.
The tangible evidence of the programme’s success is there for all to see. In terms of raw numbers, the programme has funded millions of interactions between voluntary sector organisations and people seeking help with tax and benefits issues. Funded organisations help hundreds of thousands of people every year to claim billions of pounds in benefits and tax reliefs that they would not have been able to claim otherwise.
Citizens Advice, one of the largest recipients of HMRC funding over the years, has reported helping clients to claim more than £1 billion in additional income via improved take-up of benefits and tax credits. Tax Help for Older People, one of the longest-serving grant recipients, has helped tens of thousands of older people with complex tax affairs and has often recovered significant overpayments or unlocked reliefs that make a huge difference to pensioners’ incomes.
This money is not an abstract accounting entry. It is real pounds in real people’s pockets. The difference it makes to the life of a person on a low income or living in poverty can be life changing.
The programme has also brought other, more qualitative benefits. By funding voluntary sector organisations that are based in communities, HMRC has managed to effectively punch above its weight by having its funded organisations act as proxies that penetrate into local areas and connect to sections of the population that the government would otherwise struggle to reach. This has been especially valuable in terms of reaching groups that face multiple barriers and challenges, such as refugees dealing with an unfamiliar tax system as well as the issues of language and trauma, or people with learning disabilities who need support to understand their tax affairs and obligations.
The programme has also been responsible for supporting capacity-building in the voluntary sector. Organisations that have received funding from HMRC year on year have been able to develop specialist expertise in tax and benefits issues, creating centres of excellence and services that support the community as a whole. Many have also developed training programmes, resources and tools that they have made available to share across the sector, magnifying the impact of the original grant.
It is also worth noting the positive feedback loops that the programme creates. Voluntary organisations on the ground dealing with individuals who are struggling to engage with HMRC services are in the best position to spot where there are systemic issues with those services, such as confusing forms, guidance that is difficult to understand or processes that are inaccessible or opaque to those without specialist knowledge. The feedback mechanisms built into many grant agreements mean that funded organisations can feed this information back to HMRC, creating service improvements that benefit everyone.
Limitations and challenges
Of course, the grant funding programme is not without its issues. Demand has regularly outstripped supply; the annual survey of funded organisations in the sector repeatedly finds that many have had to turn people away or operate waiting lists because of demand for their services. It can be difficult to access funding for projects for any organisation that is not already a recipient, as the grants are only awarded to successful bidders. Each year organisations have to go through the same process of submitting their applications. The system can be a source of frustration to existing funded organisations and those outside it that feel that the system is a barrier to new providers who could provide valuable services entering the market.
The level of knowledge and expertise required to help individuals with the tax system is constantly increasing as HMRC’s tax credits and benefits system becomes ever more complex. Advisers need to be constantly upskilled to be able to help with the range of problems and issues that their users have. Retaining, training and upskilling advisers takes time and resources.
The reach of the programme is also not even. There are geographical disparities in terms of availability of services, with some areas, particularly rural ones, significantly underserved. For people in these areas, their local services may not have the skills to be able to help them with their tax problems or there may be no services at all within a reasonable distance. As a result, people in these areas are reliant on a postcode lottery of service availability.
The fact that the funding process is highly competitive, despite being intended to ensure the quality of the funded organisations, does lead to instability in the funded sector. Losing funding after years of being successful can lead to skilled staff leaving and instability for the service users of those organisations.
The role of technology in modern grant management
As the voluntary sector has professionalised over the last two decades, so the expectations placed upon grant recipients have evolved. In particular, modern approaches to both charity promotion and service delivery are increasingly reliant on a technological infrastructure that many small voluntary organisations lack. As a result, organisations delivering services that have been awarded funding by HMRC are increasingly required to maintain detailed records of who they support, what they provide and what outcomes they are achieving.
In practice, this is driving more and more organisations to invest in charity CRM systems: purpose-built customer relationship management platforms for the not-for-profit sector. Charity CRM systems support organisations to track service user interactions, outcomes and referrals, and to report in the level of detail that funders like HMRC require.
The best CRM platforms for charities bring together case management, outcome tracking, volunteer management and reporting in a way that both supports frontline service delivery and meets accountability needs. For organisations delivering HMRC-funded services, a good charity system has become an essential part of their infrastructure to prove their impact without taking their eyes off service quality.
This requirement does however create a new barrier to entry. Smaller organisations, especially those delivering services to the most marginalised communities, can find themselves without the resources or expertise to implement the technology required by funders. HMRC and a range of intermediary organisations have become increasingly aware of this digital divide, with some recent funding rounds providing capacity-building elements to help small organisations develop their technology capabilities.
The new HMRC’s Grant funding round
The current round of funding represents something of a crossroads for the programme. On the one hand, the pandemic highlighted the value of these partnerships with the voluntary sector, as funded organisations were able to rapidly adapt and provide remote services during lockdown periods. On the other, many of the funded organisations found themselves in a precarious financial position as the pandemic hit, and the programme needs to take account of that and recognise that such pressures can take a long-term toll on organisations.
Digitalisation of government services, a trend that has been accelerated by the pandemic, creates both opportunities and risks. Digital routes can be more accessible for some people, but run the risk of leaving others behind, especially older people, those without digital skills and people who cannot afford broadband or digital devices. Increasingly, organisations funded by HMRC are finding themselves not only supporting people to access tax services but supporting people’s wider digital inclusion.
There are of course the evolving policy landscapes that affect what the funded organisations are supporting people with. The rollout of Universal Credit, changes to pension taxation, the emergence of the gig economy, post-Brexit immigration rules and other changes in policy all create new support requirements, and funded organisations have to be flexible and able to respond to these needs as well as supporting people with the core tasks they have always done.
The benefits of the programme extend beyond just the direct outcomes in terms of increased benefits take-up, paying the right amount of tax and ensuring compliance. By supporting voluntary sector organisations to help people to interface with the tax system, HMRC is investing in a form of social infrastructure. It is strengthening communities, building financial capability and helping to promote civic participation in other ways. These more diffuse benefits may be harder to capture and measure, but in the long run, may well be as important as the more specific tax and benefits outcomes.
Conclusion
HMRC’s Voluntary and Community Sector Grant Funding Programme has for over two decades been an example of enlightened government. It has recognised that the government agency cannot and should not seek to provide all services and help to all people who need it. It has worked to support voluntary sector organisations in the unique role they play to support vulnerable groups in our communities. The programme has funnelled millions of pounds to organisations working on the frontline at the intersection of poverty, social exclusion and onerous bureaucratic systems. It has helped millions of people to access their entitlements, to pay the right amount of tax and to find their way through systems which could so easily overwhelm them. It has built capacity within the voluntary sector, helping to create specialist knowledge and sustainable services which support our communities and which benefit far more people than those who access those organisations directly.
As charity promotion strategies become more sophisticated, as organisations in the sector use increasingly advanced charity CRM systems to help to manage and deliver their work, the programme has had to change to adapt to a more demanding sector. It has managed to strike a balance that maintains high standards of accountability for public funds whilst also allowing the flexibility and responsiveness that are at the heart of effective voluntary sector delivery.
Yet it is not without its challenges. The levels of demand for support against the limited supply of funding, the regional variations in service availability, and the competitive bidding model creating instability all present issues. With this new funding round, HMRC has a chance to look back over two decades of learning and to move the programme forwards in a way that is more strategic, more stable and more responsive to the needs of the communities it serves right across the United Kingdom.
And to the question; “what difference has it made?” the answer is clear and unambiguous: a great deal. It has made a significant, long-term and positive difference to the lives of individuals and communities across the UK. The challenge now is to ensure that the programme continues to adapt and develop so that the difference that it makes can continue and deepen for years to come.
