HM REVENUE & CUSTOMS: CHARITIES GUIDANCE NOTES

Particular situations

Guidance covers

• Educational school trips
• Church collections
• Educational trusts
• Membership subscriptions
• Adventure fundraising events: sponsorship payments and Gift Aid
• Claiming Gift Aid on donations that attract a right of admission to view charity property
• Charity auctions
• Voluntary workers' expenses
• Gifts of goods
• Charity events

HMRC Charities are occasionally approached on Gift Aid issues where possibly a number of charities might be affected by the decision we arrive at. The purpose of this section is to alert charities to HM Revenue & Customs view of particular situations involving the use or proposed use of the Gift Aid scheme.

Educational school trips

Voluntary parental contributions to charitable schools or charities associated with LEA schools to assist schools to send pupils on educational school trips in school time may be eligible for tax relief under the Gift Aid scheme, provided the usual requirements of the scheme are satisfied and in particular:

• Parental contributions are made on the basis that they are not refundable.
• Any benefit arising from the school trip does not exceed the maximum level of permissible benefit for the donation.

In general, however, it is likely that the benefits associated with a school trip contribution will exceed the maximum level of permissible benefits and so the donation will not come within the Gift Aid scheme.

Church collections

If the church has not exercised any discretion in collecting the donations and the donations are merely given to the church to pass on to a particular charity then:

• The charity must claim any Gift Aid tax relief.

However, if the church exercises its discretion and decides to open a fund for donations to a particular charity, then:

• The church is able to claim and Gift Aid tax relief.

We are also frequently asked if the tax reclaimed as well as the net Gift Aid donation should be passed to the charity by the church. It is our view that a church would be legally obliged to pass the tax associated with a Gift Aid payment to the charity.

Educational trusts

There is a cost in providing education for a child and if that cost is met in consequence of the Gift Aid payments being made to the Trust that that cost is a benefit for the purposes of the Gift Aid scheme.

Membership subscriptions

We are prepared to treat membership subscriptions paid to charities as if they were gifts if they meet the conditions below. These payments will, of course, still have to satisfy the benefit rules referred to above:

• That the payments do no more than secure membership of the charity.
• That the payments do not secure a right to personal use of any facilities or services provided by the charity.

The provision to members of, for example, periodic newsletters explaining the work of the charity, or opportunities to visit and view the work of the charity would not breach these conditions.

Where a charity separates that part of the membership subscription that simply gives the basic rights of membership from any part that relates to the provision of services or facilities the membership element can be treated as a gift.

Where a charity offers family membership we would regard the subscription as a gift to the charity provided the subscription:

• Secures membership for the donor.
• Satisfies the conditions above.

Adventure fundraising events: Sponsorship payments and Gift Aid

Sponsorship payments are eligible for the Gift Aid scheme provided all the normal requirements of the scheme are satisfied and that includes the benefit rules.

In most instances a participant will receive a benefit equal to the cost of the event, less any payment he/she personally makes towards the cost of the event. Where the value of the benefit exceeds the permitted levels Gift Aid will not be available.

Claiming Gift Aid on donations that attract a right of free admission to charity property

If, in consequence of a donation, a charity allows a donor the benefit of a right of admission to view charity property, then providing certain conditions are met, the value of that benefit may be disregarded and the donation may qualify for Gift Aid.

The following conditions must be satisfied:

Either

• A donation is made and in return the charity grants a right of admission to the donor, or the donor and his family, for a period of at least a year, at the same times at which the general public can obtain admission, or;
• A donation is made of at least 10% more than the cost of admission to the general public and in return the charity grants an equivalent right of admission to the donor, or the donor and his family.

Charities can opt to:

• Accept a donation and allow free admission for all visits during the period covered (but the charity can specify up to five days when the right of free admission does not apply). or;
• Accept a donation and grant a right of admission on payment of a reduced fee, which must apply for the first and all subsequent visits during the period covered. In this scenario only the initial donation will qualify for Gift Aid.

A charity may decide to provide visitors with benefits as a thank you for making an optional 10% donation; this is acceptable providing the benefits do not exceed the normal benefit rules.

Example:

• The admission charge to view a charity's property is £20.00.
• Visitors making a donation of an extra 10% are granted free admission.
• The full amount paid, £22.00 qualifies for Gift Aid and the charity can therefore give other benefits with a value of up to £4.50 (being 25% of £22.00).
• If the charity gives a soft toy worth £5 (the benefit to the donor is the retail value not the cost of the item to the charity) no Gift Aid can be claimed on the donation as the benefit limit is exceeded.
• If the charity offers a voucher for £4.00 to spend in the restaurant, the donation will qualify for Gift Aid.

A donor cannot make a qualifying donation in respect of payment for a group of people who are not members of his/her family.

An individual can, however, collect donations from members of a group and pass them on to the charity for administrative convenience. Each member of the group who makes a donation must individually fulfil the Gift Aid conditions. Any cheques must be made payable to the charity rather than the group organiser.

There is no equivalent relaxation of VAT rules for payments to gain admission to view charity property.

VAT becomes due on the amount paid in addition to the admission charge at the rate appropriate to the benefit provided.

Where a charity receives a gift aid donation which is in part subject to VAT at the standard rate, the VAT position is as follows:

• That part of the payment representing the normal admission charge is standard rated.
• The additional amount is a donation and outside the scope of VAT, provided that it is truly voluntary and gives no additional benefits.

There is no VAT on a face value vouchers when they are sold. However, when redeemed for goods or services these vouchers are treated as consideration.

Charity auctions

A payment for an item at a charity auction is not a gift to charity.

However, HM Revenue & Customs recognises that when a person purchases a lot at a charity auction they may intentionally pay more than it is worth in order to support the charity. So, on that basis, we are prepared to treat a payment for an auction item as a donation to the charity.

The payment will only qualify as a Gift Aid payment if the normal requirements of the Gift Aid scheme are met, and that includes satisfying the Gift Aid benefit rules.

Voluntary workers' expenses

Voluntary workers sometimes incur expenditure when assisting charities to carry out their work. Provided the expenses are reasonable and proper, a charity can reimburse a volunteer for the expenses incurred.

One of the requirements of the Gift Aid scheme is that the gift by a donor to a charity 'takes the form of a payment of a sum of money'. So a Gift Aid payment to a charity cannot be made by book entries following a waiver of expenses.

Gifts of goods

We have been asked whether charities can claim repayment of income tax under Gift Aid when supporters give them goods rather than money. The short answer is 'no' as Gift Aid only applies to gifts of money.

If a supporter gives an asset other than money to a charity that gift will not qualify for Gift Aid. However, if the charity or its subsidiary trading company agrees with the supporter to sell the item on the supporter's behalf, the supporter can then give the proceeds to the charity, which can claim Gift Aid.

Charity events

Charities often hold events (dinners, concerts, firework displays, etc.) to raise funds and ask whether all or part of the payment to attend the event can be Gift Aided.

To be eligible for the Gift Aid scheme a payment must be a freewill gift to charity.

A charity can, therefore, charge a set ticket price (not Gift Aidable) and, in addition, request a donation that can be Gift Aided. However, any suggested donation:

• Must not be compulsory such that it has to be paid.
• The payer must be aware of that at the time he makes the suggested donation.

The full HM Revenue & Customs guidance notes can be found at:

http://www.hmrc.gov.uk/charities/guidance-notes/chapter3/sectionf.htm