Tax & VAT update - Institute of Fundraising




Speaker: Bill Lewis

2 June 2010


 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



Event organised and promoted exclusively for charity by charity or wholly owned trading subsidiary


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.


Event cannot include more than 2 nights accommodation

Fundraising Events Tax & VAT



Examples: film, sporting participation

(including spectators), dinner, concert, dance, games of skill, fireworks displays, jumble sales


Not street or house to house collections


What constitutes a location?

Tax & VAT Exemption Covers


Admission charges




Sale of advertising space


Other items sold at the event (unless zero rated)


Sponsorship payments


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?