Tax & VAT update - Institute of Fundraising

advertisement

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.

2.

3.

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

Exemption

1.

2.

3.

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

1.

2.

3.

4.

Admission charges

Brochures

Sale of advertising space

Other items sold at the event (unless zero rated)

Sponsorship payments 5.

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?

Download