Gift Aid and admissions

Contents

The Inland Revenue has today published draft legislation in relation to Gift Aid and gifts to charity that attract a right of admission to a charity. Comments are required on the draft legislation by 18 February.

Background

The Chancellor of the Exchequer gave details in the Pre-Budget Report (PBR) 2004 of how a special exemption in the Gift Aid rules will be amended. The special exemption currently allows the right of free admission to be disregarded as a benefit for the purposes of Gift Aid, where the charity’s sole or main object is the preservation of heritage property or the conservation of wildlife. The PBR report says:

'After detailed discussions with the charity sector, an approach has been established which upholds the principles of Gift Aid, while recognising the unique position of charities dependant upon visitor support. To encourage additional Gift Aid donations and support for charities, the scope of the statutory exemption, which allows for the right of free admission to be disregarded as a benefit, will be expanded to allow more types of charities reliant on visitor support to benefit. The Government will discuss with the charity sector how the broader scope of the exemption will be defined. In addition, the exemption will be amended so Gift Aid will apply where the donation is at least 10 per cent more than the normal admission charge, or where the donation results in the unlimited right of admission for a period of not less than 12 months. The Government will introduce these changes in April 2006 to allow time for charities to make the necessary preparations to operate the new scheme.'

Consultation

We would welcome comments on the draft legislation (PDF 46K) that will give effect to the changes announced by the Chancellor. A copy of the draft is attached below. We are keen to ensure that the legislation works as intended and, in particular, that the range of visitor attractions run by charities in fulfilling their charitable purposes is covered. It would be particularly useful to hear from you if you identify any areas where the legislation is unclear, where you think there may be difficulties with implementation or where you have other suggestions for improvement. Please send or e-mail your comments on the draft legislation by 18 February to:

Emma Bailey
HM Treasury
Room 2/N1
1 Horse Guards Road
London SW1A 2HQ

Draft Legislation

It may be helpful to give a brief outline of what the draft legislation (PDF 46K) is intended to do.

Subsection 1 amends the Gift Aid legislation for individuals contained in section 25 Finance Act 1990. It replaces subsections (5E) to (5G) with new subsections (5E) to (5I). It provides for a revised exemption from the benefit rules for a right of admission to view the property of a charity.

New subsection 5E means that a right of admission to view the property of a charity will not be regarded as a benefit in determining whether a gift to charity is eligible for Gift Aid where the conditions of subsections 5F to 5H are met.

New subsection 5F requires any member of the public to have the right to make a gift to charity that attracts a right of admission to view the work of the charity.

New subsection 5G replaces the old requirement based on the purpose of the charity. Previously the exemption applied where the sole or main object of the charity was to preserve heritage property or conserve wildlife for the benefit of the public. The new requirement is that a right of admission is granted to view specified types of property preserved, maintained, kept or created by a charity in pursuance of its charitable purposes. This opens the exemption to a much wider range of charities but the fact that the property must be preserved, maintained kept or created ‘in pursuance of its charitable purposes’ means that commercial activities run solely to raise funds would not be eligible. For example, an amusement park in the grounds of a museum would not be eligible. Loan exhibitions and reciprocal agreements with other charities will benefit from the exemption.

New subsection 5H specifies two alternative situations where the exemption may apply. The first is where a right of admission given in return for the gift is valid for a period of at least one year at all times that the general public can gain admission. The number of visits within this twelve month period should not be restricted. This situation should allow most annual membership schemes to qualify. The second situation is where the right of admission is for less than one year. The gift must be at least 10% more than the amount that any member of the public would have to pay to gain the same right of admission. So a donation giving a right of admission for say one day or one week would need to be at least 10% more than a member of the public would pay for a ticket giving admission for a week. [If there is not a comparable public ticket the value of the right of admission will not be disregarded and will need to be taken account of when determining whether the benefits received in consequence of the gift exceed those allowed by the normal Gift Aid benefit rules apply]. Where the gift is at least 10% more and all of the other requirements of 5F to 5G are met the whole of the gift is eligible for Gift Aid.

New subsection 5I provides definitions for terms used in 5E and 5H. For the purposes of 5E it defines “right of admission” as a right of admission for a person making a gift, or that person and one or more family members, to property that the public are required to pay an admission fee to enter and to which that person either pays no admission fee or a reduced admission fee and instead makes a gift. For the purposes of 5H “the same right of admission” is defined as a right of admission that applies to the same property, classes of person, or periods of time as the right received as a result of making a gift.
Subsection 2 sets out when the new provisions will have effect. This will be for gifts made on or after 6 April 2006. The current exemption will apply to gifts made up to and including 5 April 2006. There are no transitional arrangements.