Charities cannot gift aid admission tickets if right of refund

Mon 06 Oct 2014

HMRC have amended their Detailed Guidance Notes to charities and community amateur sports clubs (CASCs), in particular with regard to gift aid.

Whilst the gift aid rules have very stringent and restricted limits on benefits that the charity may provide to the donor or persons connected with him, certain valuable benefits may be provided to donors and persons connected with the donor without prejudicing entitlement to include the receipt in the charity’s gift aid income.  One of these is the right of admission to view property including the right to view works of art (the types of properties are listed at ITA 2007 s 420(6)).  Charites that operate the gift aid scheme for admission to exhibitions can earn significant additional revenues from gift aid tax recoveries. HMRC accepts that  a reasonable, modest level of benefit to donors is acceptable as an incentive to attract larger donations but they will value the benefit received, especially in the case of substantial donations, to decide whether the level of benefit is reasonable: if it is not gift aid relief will be denied to both donor and charity.

It would appear that HMRC have identified that some charities are selling advance tickets for exhibitions etc and will give a refund if the exhibition is cancelled.  HMRC are reminding charities that the gift aid rules have an absolute ban on entitlement to refund: Condition B in ITA s 416 is “that the payment is not subject to any condition as regards repayment.”

Thus, as HMRC say in the newly added example in paragraph 3.48.13 of the notes, the terms and conditions under which the ticket is issued cannot include any entitlement to refund, “for example, in the event of bad weather, cancellation of an exhibition or mechanical failure of an exhibit.” Such an arrangement would clearly be conditional on provision of the service, rather than the intention to make a true donation. In contrast, a ‘rain-check’ or right to come back at another time, or even to attend another event of comparable worth should not compromise the relief.