In the Friends of the Earth Trust Ltd case (TC05165) the Tribunal held that certain payments made by a charity’s supporters were donations rather than consideration for any supply, with the result that VAT incurred on street fundraising costs was not recoverable.

The charity’s appeal related to the issue of whether certain payments made by supporters were donations (which were outside the scope of VAT) or consideration for a supply of a magazine and other benefits.

The Tribunal held that overall the evidence was simply not consistent with the transaction objectively being one where the person was paying a subscription for the magazine and other benefits. It was quite clearly a donation to support the charity’s charitable activities. The fact that the charity only provided the benefits if the minimum payment of £3 was made did not turn the payment into value given in return for the magazine and other benefits. It still retained its character as a donation. It was just as consistent with the transaction being one whereby the taxpayer undertook to send a free copy of the magazine where donations were made above a certain level. The Tribunal therefore concluded that the payments were donations to the taxpayer. They were not consideration for the supply of the magazine and other benefits. It was not therefore necessary to deal with the parties’ arguments as to the attribution of the supply and whether it was zero rated.