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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 will still qualify for Gift Aid. If the benefit value exceeds these limits the donation won't qualify for Gift Aid.
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A benefit is any item or service provided by the charity or a third party to the donor or a person connected with the donor and which is associated with the donation.
The benefit does not have to be monetary or have a market value.
A person is connected with the donor if that person is:
Some items don't count as benefits, for example:
Admissions to view a charity property
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 sets the maximum value of a benefit for a particular amount of donation as follows:
Amount of donation |
Maximum value of benefits |
|
|---|---|---|
| £0 - £100 | 25% of the donation | |
| £101 - £1,000 | £25 | |
| £1,001+ | Made before 6 April 2011 | 5% of the donation (up to a maximum of £500) |
| Made on or after 6 April 2011 | 5% of the donation (up to a maximum of £2,500) | |
These limits apply separately to each donation.
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 or CASC in that tax year must not exceed £2,500 (£500 where the donations were made between 6 April 2007 and 5 April 2011).
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.
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.
Where a benefit is attendance at an event that is not open to the public (so that there is no ticket price), and which is not a fund-raising event of the kind described in paragraph 3.27.6 of the detailed guidance (see link below), the benefit should be valued by looking at the cost to the charity (or third parties) of staging the event divided by the number of people at the event.
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.
Where the benefit is a discount on goods or services - which an individual member 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 members.
When a benefit given to a donor would exceed the benefit limits - so Gift Aid couldn't be claimed - it is possible, provided certain conditions are met, for the donor's payment to be split between an amount to cover the cost of 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 given to the charity and the remainder is treated as the donation.
Gift Aid can only be applied to the remainder if:
An arts charity has a patron scheme where, for a donation of £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. In this case then the benefit received by the donor for the free tickets is £200.
The maximum benefit the donor can receive for a donation of £1,000 is £25. As the benefit received by the donor for the free tickets is £200 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 split the payment and treat £200 as payment for the tickets and the balance of £800 as a Gift Aid donation
For auction items, the option to split the payment only applies where:
Your charity or CASC and the donor should keep evidence of this arrangement - for example an exchange of letters.
Gift Aid record keeping and audit requirements
If your charity or CASC give benefits in return for payments, there may be an impact on whether the charity or CASC should be registered for VAT and on any VAT payable. 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.
VAT for charities and not-for-profit organisations: introduction
For more help you can contact HMRC Charity Helpline.
Contact details for HMRC Charities Helpline
Read more about the benefits received by donors in the detailed guidance notes
