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CORPORATE FUNDRAISING GIFT AID AND FUNDRAISING

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					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
        Fundraising &
 UK Commercial Challenge Events
 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



   More information in VAT Notice
    701/1 “Charities”
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
Charity Challenge Events – New Rules

 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.
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?
Charity Challenge Events – New Rules


 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.
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.
Light Relief - Quirky Case Law

 The Jaffa Cake Case
 Wheatgrass Juice
 Mr Lumby’s Missing Beer
 Fagomatic – is a Lamborghini a business
  van?
 RNLI – Is it a necessary for a lifeboat?
 London Zoo – where HMRC belong?
Any Questions?

				
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