Gift Aid and fundraising dinners

The accountancy firm BDO Stoy Hayward has put together new guidelines regarding fundraising event dinners, which have been agreed with HM Revenue & Customs.

The move is in response to the HM Revenue & Customs investigation of a number of charities and its concerns over incorrect Gift Aid relief claims for fundraising dinner events.

Daniel Dover, Head of the Tax Investigations Group at BDO Stoy Hayward, explains:

BDO Stoy Hayward’s guidelines highlight that for Gift Aid to apply, the donation must be purely voluntary. Where a charity specifies a “minimum donation” or fixed price on a ticket for an event, such donations would not be regarded as voluntary so Gift Aid will not apply. The guidelines suggest that charities wishing to claim Gift Aid should make it clear that they are requesting voluntary donations by specifying “suggested voluntary donation of £X” on event literature.

Charities need to ensure that benefits are not received by donors as a result of giving voluntary donations or the donations may fall foul of the “donor benefit rule”. This states that where benefits such as a meal are received “in consequence of” a donation, Gift Aid will not apply if the benefit exceeds certain limits. For fundraising dinners, the value of the benefit is the direct cost to the charity before sponsorship in staging the event divided by the number of people attending.

Benefit Limits

The limits to the value of benefits received as a consequence of a charitable donation. If benefits received exceed these limits the donation will not qualify for Gift Aid.

If the value of benefits does exceed the relevant limits then the donation in its entirety cannot qualify for Gift Aid. Unfortunately for many fundraising dinners, the costs per head will exceed these limits.

However, the BDO Stoy Hayward guidelines contend that where invitations for an event request “suggested voluntary donations of £x” the charities are in reality staging free events for potential supporters and donors. This means that any benefits received such as a free meal are not received “in consequence of a donation” but are received in consequence of the invitation to the event. This means that the donor benefit rule will not apply and Gift Aid relief will be claimable, subject to the normal qualifying rules.

The guidelines also looked at a number of other aspects of fundraising dinners and reaffirm that Gift Aid cannot be claimed on the following:

• advertisements in event brochures unless the advertisement amounts to an acknowledgement only for example a greeting and/or best wishes message.
• lottery or raffle tickets.
• -donation of brochure monies to support an event where free tickets to the event are given in return when a charge would normally be payable for them. If a ticket entry price is being charged for the event then the Gift Aid benefit limits apply to the brochure donation. For example, if an individual makes a brochure donation of £1,500 and gets five free tickets for the event which would normally be charged at the cost price of £50 each, the total ‘benefit’ is £250. The limit of the allowed benefit for the donation is 2.5%, which is only £37.50. This means the donation has not qualified for Gift Aid benefit. However, if the event was a free event where no price was being charged for tickets and the individual received five free tickets, no value would be assigned to the benefit and hence the brochure donation would qualify for Gift Aid.