If your charity holds events to raise funds, the rules on when you can and can't claim Gift Aid can be tricky to navigate. Judith Pederzolli from PEM shares expert advice so you don't miss out on a single penny.
Charities hold a variety of events to raise funds. It is vital to know whether Gift Aid can be claimed on donations received from these, otherwise claims could be missed, or made on ineligible donations.
Below are some of the more common fundraising activities and tips on how to maximise Gift Aid claims for these. The focus is on the donor benefit rules, but the other Gift Aid requirements, such as receiving a valid declaration, will still need to be met.
Charity Auctions
Auction bids can attract Gift Aid in some circumstances. Generally, payments for items at charity auctions are purchases and not gifts. However, bidders often intentionally pay over the odds for an item so that the charity can receive a benefit.
For a payment, or part of it, to be eligible for Gift Aid it is important that the donor benefit thresholds are adhered to. As a reminder, the current donor benefit thresholds are 25% of the donation for gifts of up to £100, then 5% of the donation on the amount above £100, up to a maximum benefit of £2,500.
If the item is commercially available, the benefit for Gift Aid purposes is the market value of the item. However, if it has been increased in value, e.g. signed by a celebrity, or is an item which is not commercially available, the benefit is the amount of the auction bid, so Gift Aid is not available.
If an item’s auction price compared to market value means that the benefit rules are not breached, the whole amount can be treated as a donation.
If the limits are breached then only the excess over the commercial price can be treated as a Gift Aid donation. For the latter case, the donor must know the market price at the time of bidding, so they know they are paying an excess as a donation, and the same item must be available to purchase elsewhere.
For auctions of promises, generally, the services will not be commercially available. However, there are exceptions, such as a local business offering their services for free, so the market value of the promise can be easily ascertained.
Charity events
Many charities hold dinners or similar events to raise funds, by charging for attendance and also collecting donations at the event.
If there is a set ticket price or minimum donation to attend then it is not a gift. However, if there is a ticket price, plus a suggested donation, this enables Gift Aid to be claimed on the donation element.
It must be clear that the right to attend is available even if no donation is made and no special treatment is given to those making the extra donation.
For example, a charity puts on a concert to raise £2,000, the cost being £5,000. By inviting 100 people, the receipt from each attendee needs to be £70 to achieve their goal.
Rather than setting £70 as the ticket price, they charge £60 for attendance with a £10 suggested donation. The £10 would be eligible for Gift Aid but if donations are not received the charity still covers its costs and raises additional funds.
If no ticket price were charged this could put the charity’s funds at risk, which could cause tax and governance issues.
Sponsored challenge events
Challenge events, such as parachute jumps and treks, are a fun way to raise funds and generate publicity. Usually, participants pay a registration fee and have a sponsorship target.
The charity pays for the cost of the event. Sponsorship payments from individuals not connected with the participant can qualify for Gift Aid.
However, whether payments from family members (spouse/civil partner, children, grandchildren, parents, grandparents and siblings and the spouses/civil partners of these) qualify for Gift Aid depends on the donor benefit rules.
A participant is receiving a benefit equal to the cost of the event, less any payment they make towards the cost.
Where the value of the benefit exceeds the donor benefit thresholds, Gift Aid will not be available on sponsorship payments from the participant or their family members.
If they pay the full cost of the event then the benefit is nil and Gift Aid can be claimed on all donations but not the payment to meet costs.
It is difficult for a charity to know the relationships between participants and those sponsoring them, so on the event documentation and sponsorship form the rules as described above should be outlined, along with a definition of who would be connected with participants.