Gift Aid – are you maximising claims on fundraising activities?

Charities need to know whether or not Gift Aid can be claimed on donations received from fundraising events to ensure that they maximise their income and to avoid making claims on any ineligible donations.

Whilst there is a need for charities to understand Gift Aid requirements, such as receiving a valid declaration, this article will focus mainly on donor benefit rules, looking at some of the more common fundraising activities and providing tips on how to maximise Gift Aid for these claims.

• Charity Auctions

For a payment, or part of it, to be eligible for Gift Aid it is important that the donor benefit thresholds are adhered to. The current thresholds are 25% of the donation for gifts up to £100, then 5% of the donation on the amount above £100, up to a maximum benefit of £2,500.

At an auction, payments for items are considered purchases and not gifts, however, it is not unusual for bidders to intentionally pay over the odds for an item so that the charity can receive a benefit.

The benefit for Gift Aid purposes is the market value of the item, where the item is commercially available, however, if a celebrity has signed the item, for example, this may increase the value and Gift Aid would not be available.

If an item’s auction price compared to the market value mean that the benefit rules are not breached, the excess over the market value can be treated as a Gift Aid donation. At the time of bidding the donor must know the market price so that they know they are paying an excess donation and the same item must be available to purchase elsewhere.

Generally, services will not be commercially available where the auction is one of promises, however there are exceptions where for example local businesses offer their services for free and the market value of the promise can be easily ascertained. For example, the promise of a one-off coaching session from the captain of the local professional football team would have an unknown market value, whereas auctioning a lesson from a tennis coach who normally charges a set price per lesson would.

• Charity Events

Where charities hold dinners or similar events to raise funds by charging for attendance, and also collecting donations at the event, it is not a gift when there is a set ticket price or minimum donation to attend. Where there is a ticket price plus a suggested donation this enables Gift Aid to be claimed on the donation element where the right to attend is not dependant on making the donation nor any special treatment given to the donor.

An example of this would be if a local Rotary Club put on a dinner, the cost of which is £10,000. To achieve a profit of £10,000 from the 200 attendees they would have to set a price of £100 per ticket. Rather than doing this they might decide to set a ticket price of £80 with a £20 suggested donation. The £20 would be eligible for Gift Aid but if the donations are not received the charity still covers its cost and raises the additional funds.

If no ticket price were charged this could put the charity’s own funds at risk which could cause tax and governance issues.

• Sponsored Challenge Events

Challenge events, such as the Kiltwalk, are fun ways to raise funds and generate publicity. Participants pay a registration fee, and may have a sponsorship target, whilst the charity pays for the cost of the event.

Sponsorship payments from individuals not connected with the participant qualify for Gift Aid whereas payments from family members will only qualify depending on the donor benefit rules.

The participant is receiving a benefit equal to the cost of the event, less any payment they personally make towards the cost. Gift Aid will not be available on sponsorship payments from the participant or their family members where the value of the benefit exceeds the donor benefit thresholds.

If the participants pay the full cost of the event however then the benefit is nil, and Gift Aid can be claimed on all donations but not the payment to meet costs.

To ensure the charity knows the relationship between participants and their sponsors, the event documentation and sponsor form should outline the rules as described above together with a definition of who would be connected with the participants.

By taking the above into account, it is possible for charities to maximise Gift Aid claims for these types of events and our EQ charity specialists can offer assistance in making sure your charity is adhering to the Gift Aid requirements.

For further support with Gift Aid,  please contact a member of our EQ Charities team via charities@eqaccountants.co.uk or contact one of our offices.