CORPORATE FUNDRAISING, GIFT AID AND FUNDRAISING EVENTS VAT & TAX RULES
Speaker: Bill Lewis
2 June 2010
Topics
Fundraising Events Exemption Gift Aid Rules for Participation in Commercial
Challenge Events Working with Corporate Partners – VAT
issues Quirky Case Law
Fundraising Events Tax & VAT Exemption
1. Event organised and promoted exclusively for charity by charity or wholly owned trading subsidiary
2. No more than 15 events of the same type in the same location within any one financial year – disregarding events where gross income is £1,000 or less in a week.
3. Event cannot include more than 2 nights accommodation
Fundraising Events Tax & VAT Exemption
1. Examples: film, sporting participation (including spectators), dinner, concert, dance, games of skill, fireworks displays, jumble sales
2. Not street or house to house collections
3. What constitutes a location?
Tax & VAT Exemption Covers
1. Admission charges
2. Brochures
3. Sale of advertising space
4. Other items sold at the event (unless zero rated)
5. Sponsorship payments
6. Raffles (NB auctions are zero rated)
Does not cover sponsorship payments of event participants!
Gift Aid on Entry Fees?
Only if there is a suggested entry fee and people cam attend whether they pay the fee or not; or
The fee is sufficiently high so that the benefits of the event are within the donor benefit limits;I.e
Donation up to £100 – 25% £101 - £1,000 - £25 Over £1,000 – 5%
Charity Auctions
Commercially available items – can be bought using gift aid dependent on donor benefit rules
Not commercially available items - no gift aid
VAT – Sale of donated goods – zero rated Direct Tax – one off fundraising event – tax
free
Rules for London Marathon, Great North Run etc. Where charity requires a minimum sum of
sponsorship or a registration fee there is a sale for VAT purposes
VAT must be charged/included in sale price and registration fee
Target sponsorship is not a sale for VAT If you do not raise £x you cannot run means £x is a
sale price
Fundraising & UK Commercial Challenge Events
Charity must pay VAT charged on “Sales” but can recover VAT on cost of gold bonds and other costs
Charity must not provide “substantial benefits” Pre race advice, T shirts/vests, pasta parties, post race
massages, drinks, meals, and prizes for top fundraisers are not “substantial”
Hotels, accommodation, free gifts for all are “substantial”
Fundraising & UK Commercial Challenge Events
Fundraising and Charity Challenge Events - Old Rules
VAT is payable on “the margin” - I.e. difference between cost of event and the minimum sponsorship required to take part.
Charity is a travel agent - so no VAT recovery on cost of tour; VAT can be recovered on general overheads.
In Summary -provided participant contracts direct with the travel agent and charity simply publicises and acts as a payment agent – no VAT. If charity provides tour itself and in the EU - VAT on margin.
No VAT on sponsorship, no VAT recovery on costs
New Rules For Contracts signed or events publicised (if earlier) from 31 July 2008.
Minimum sum required to take part? “No” - then no VAT! There is no “supply”. If “Yes” then
Does the event include bought in accommodation, or a package of both travel and accommodation? If “No” -
Possibly eligible for fundraising exemption (does the event include more than two nights accommodation from own resources)? “No” - then VAT exempt under the one off fundraising events exemption.
Charity Challenge Events – New Rules
Challenge Events - New Rules
If there are more than 2 nights accommodation the Tour Operators Margin Scheme Applies - VAT charged on the margin.
If the answer is “Yes” to “Does the event include bought in accommodation, or a package of both travel and accommodation?” then
Is the charity acting as principal or undisclosed agent, or as disclosed agent?
If disclosed agent then VAT due on “commission” payable by tour provider; VAT reclaimable on all associated costs. BUT
If the charity is acting as principal or undisclosed agent - Then VAT is due on the margin (difference between cost
of the event and minimum sum to take part) BUT If the event takes place outside the EU the margin
is zero rated for VAT.
Charity Challenge Events – New Rules
Changes introduced because of perceived charity competition with Tour Operators & Travel Agents
Consider how you run your challenge events – undisclosed agent and run events outside the EU is possibly best and easiest route.
Charity Challenge Events – New Rules
This is complicated - where can I get help?
Appendix “Update 2” at back of HMRC VAT Notice 701/1 - Charities
Don’t forget the Gift Aid
Sponsorship by non-connected persons can be gift aided
Value of services will exceed max gift aid benefits No gift aid by participant or connected person up
to value of services Additional gifts by participant and connected
people can be gift aided Identifying value
Connected Persons Are
Wife or husband Relative (brother, sister, ancestor, lineal
descendant Wife or husband of a relative Company under control of donor or
connected persons
How Much Gift Aid?
HMRC Example Event cost: £1,200 Min sponsorship £2,500 Participant pays £1,200 Balance can be gift aided by participant
and connected people
Gift Aid Declarations
Recommended formats on HMRC website for:
Gift Aid declaration Sponsorship form with gift aid declaration R68 claim form
Audit trail – match cheque from participant with total on sponsorship form
VAT & Corporate Sponsors
Donations – outside the scope of VAT If sponsor simply asks for
acknowledgement – no VAT If sponsor requires use of their name &
logo – this is advertising, non charitable activity.
Ensure 10% of sponsorship is run through the trading company as a fee for the advertising service with VAT charged. Remaining 90% can be given as a donation to charity.
What if Corporate Wants More?
May have to consider more of the payment from the sponsor being a fee subject to VAT run through the trading company
Consider on a case by case basis - get advice.
Likewise advertising charity’s name and logo by corporate is subject to VAT.
As are website links, product endorsements, etc.
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