In this section:
- Gift Aid: the basics
- How to reclaim tax on Gift Aid and other income
- Gift Aid declarations
- Gift Aid record keeping and audit requirements
- Providing benefits in return for donations: rules and limits
- Gift Aid rules in specific situations
- Gift Aid for Community Amateur Sports Clubs
- How to run an effective Gift Aid scheme
Providing benefits in return for donations: rules and limits
When someone makes a donation to your charity or Community Amateur Sports Club (CASC), you may want to give them (or people connected to them) a token of your appreciation - a 'benefit'. As long as the value of the benefit doesn't exceed certain limits the donation still qualifies for Gift Aid. If the benefit value exceeds these limits the donation won't qualify for Gift Aid.
On this page:
- What is a benefit?
- What is not a benefit?
- What is a 'connected person'?
- Limits on the value of benefits
- Working out the value of benefits
- Buying a benefit
- How benefits affect VAT
- Contacting the HMRC Charities Helpline
- More useful links
What is a benefit?
A benefit is any item or service given by your charity or a third party to the donor or to a person connected to them in return for a donation. Examples might include theatre tickets or discounts.
The benefit does not have to be monetary or have a market value.
What is not a benefit?
Some items don't count as benefits, for example:
- an acknowledgement of a donor's generosity, for example in a printed brochure or on a plaque - this must however be a simple acknowledgement and not an advertisement
- literature describing the work of your charity or CASC such as newsletters, annual reports or a members' handbook
- the right of admission to view charity property if it is granted in return for a donation of at least 10 per cent more than the admission charge, or if the admission is for a period of at least a year at the same times as the general public can gain admission
Admissions to view a charity property - find out more about the Gift Aid rules
What is a 'connected person'?
A person is 'connected to the donor' if they are:
- 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
- a company under the control of the donor, or under the control of any of the above
Limits on the value of benefits
There are two limits that apply to the value of the benefits that a donor, or a person connected with the donor, may receive in return for making a donation.
These are worked out using the relevant value test and the aggregate value test. If the value of the benefits received exceeds either of these limits, the donation will not qualify for Gift Aid.
The relevant value test
The relevant value test sets the maximum value of a benefit for a particular amount of donation as follows:
Amount of donation |
Benefit value limit |
|---|---|
£0 - 100 |
25% of the donation |
£101 - £1,000 |
£25 |
Above £1,000 donated up to and including 5 April 2007 |
2.5% of the donation |
Above £10,000 donated up to and including 5 April 2007 |
£250 |
Above £1,000 donated on or after 6 April 2007 |
5% of the donation |
Above £10,000 donated on or after 6 April 2007 |
£500 |
These limits apply separately to each donation.
The aggregate value test
As well as passing the relevant value test above, the benefits must also pass the aggregate value test. This says that the value of benefits received by the same donor in one tax year as a result of making more than one donation to the same charity in that tax year must not exceed:
- £250 for donations made up to and including 5 April 2007
- £500 for donations made on or after 6 April 2007
Working out the value of benefits
The value of a benefit is always the value to the recipient, not the cost to your charity or CASC of providing the benefit. So even though your charity or CASC may get a discount on the cost of any benefits you give to donors, the benefit must be given its full value when working out whether a donation qualifies for Gift Aid.
Valuing goods and services
For many benefits the value is simply the retail value of the item or service. For example if a donor receives a free theatre ticket, the value of the benefit is the face value of the ticket.
Where a retail value can't be found, your charity or CASC must work out how much someone would be prepared to pay for the item or services - looking at similar commercial transactions will help.
Valuing attendance at a non-ticketed event
Where a benefit is attendance at an event that is not open to the public (so that there is no ticket price) the benefit should be valued by dividing the cost to the charity of staging the event by the number of people at the event.
Valuing benefits in return for life membership subscriptions
Where a benefit is given in return for a life membership subscription, to arrive at the benefit value you estimate the value of all the benefits that will be received over the first ten years of the membership.
Valuing benefits which are discounts
Where the benefit is a discount on goods or services - which an individual donor may or may not take advantage of - the valuation can be based on the average take-up of the benefit by all your charity's donors.
Charity events - how the Gift Aid rules apply
Membership subscriptions - how the Gift Aid rules apply
Buying a benefit
When a benefit given to a donor would exceed the benefit limits - so Gift Aid couldn't be claimed - it is possible for the donor's payment to be split between an amount to 'buy' the benefit and an amount that is treated as a gift. To do this the value (cost) of the benefit is taken away from the amount of the donation and the remainder is treated as the donation.
Gift Aid can only be applied to the remainder if:
- the benefit can be purchased separately
- the donor is aware of the value of the benefit at the time the donation is made
Example
An arts charity has a patron scheme where, for a donation of a £1,000, an individual can become a patron. In return the charity provides the benefit of ten free tickets (value £20 per ticket at the box office) for forthcoming events.
The maximum benefit the donor can receive for a donation of £1,000 is £25. The benefit received by the donor for the free tickets is £200. So the Gift Aid benefit limit is exceeded and the whole of the donation does not qualify for Gift Aid.
However, the donor is aware that the cost of the benefit of the ten free tickets is £200 and so elects to 'buy the benefit' and treat the balance of £800 as a Gift Aid donation.
Items bought at a charity auction
For auction items, the option to 'buy a benefit' only applies where:
- the item is commercially available
- the donor is aware, at the time they make a successful bid that the item could be purchased separately and for what price
Your charity or CASC and the donor should keep evidence of this arrangement – for example an exchange of letters.
Charity auctions - find out more about the Gift Aid rules
Gift Aid record keeping and audit requirements - find out more
How benefits affect VAT
If you give benefits in return for payments, it may have an impact on whether you should be registered for VAT and on any VAT that you have to pay. For VAT purposes a payment is a donation and outside the scope of VAT as long as no significant benefit is provided to the donor in return. The special benefit rules for Gift Aid do not apply to VAT.
If your charity or CASC gives a donor a benefit in return for a payment, this may be considered a business supply for VAT purposes and the normal VAT rules may apply.
Giving something minor to a donor, such as a sticker or naming the donor in a list of supporters, would not count as a benefit and wouldn't have an impact on VAT.
Find out more about VAT and what income counts as a business activity
Contacting the HMRC Charities Helpline
For more help you can contact the Charities Helpline on Tel 0845 302 0203 (open from 8.00 am to 5.00 pm, Monday to Friday). Select Option 6 for Gift Aid.
More useful links
Read more about the donor benefit rules in the detailed guidance notes
Adventure fundraising events - how the Gift Aid rules apply
Donations for school trips - how the Gift Aid rules apply
