Gift Aid donor benefits

Certain benefits can be provided to a donor by a charity. So long as the value of the benefits does not exceed the permitted limits, the gift can still qualify as a Gift Aid donation. The rules relating to the provision of benefits extend not only to benefits to the individual donor but also to anyone who is connected with the donor. For these purposes, a donor is connected to:

  • the donor’s husband, wife, civil partner or linear relative (for example son, daughter, parent, grandparent, or grandchild)
  • any linear relative of the donor’s wife, husband or civil partner, or
  • a company under the control of the donor or under the control of any of the above.

A benefit is defined as an item or a service that is provided by the charity or a third party to the donor (or anyone connected to the donor) in consequence of making the donation. A donation cannot qualify for Gift Aid if the value of the benefits exceeds the following limits:

EITHER:

Donation                         Permitted benefits value

Up to £100                     25 per cent of the donation

£101 – £1,000              £25

Over £1,000                  5 per cent of the donation

OR: if the value of the benefits plus the value of any benefits received from earlier donations made to the same charity within the same tax year exceeds £2,500.

Where a benefit to a donor would be available to a member of the public at a specified price, the benefit value will generally be the price to the public (less any reduced price payable by the donor). In situations where there is no comparable open market price, the charity must work out how much someone would be prepared to pay for the item or services, for example by looking at similar commercial transactions. Where a benefit is attendance at an event that is not open to the public (so that there is no ticket price), that benefit should be valued by dividing the cost to the charity of staging the event by the number of people at the event.

Where a benefit is given in return for a life membership subscription, the benefit is derived by estimating the value of all the benefits that will be received over the first ten years of the membership. Where the benefit is a discount on goods or services of which an individual donor may or may not take advantage, the valuation can be based on the average take-up of the benefit by the donors of the charity.

It was announced in the March 2014 Budget and confirmed in the 2014 Autumn statement that the Government would review the rules on donor benefits, including the rules for claiming Gift Aid on membership and entrance fees.

HMRC has published full guidance on benefits received by donors and connected persons.

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