Transcript Tax & VAT update - Institute of Fundraising

CORPORATE FUNDRAISING, GIFT AID AND
FUNDRAISING EVENTS VAT & TAX RULES
Speaker: Bill Lewis
2 June 2010
Topics
 Fundraising Events Exemption
 Gift Aid
 Rules for Participation in Commercial
Challenge Events
 Working with Corporate Partners – VAT
issues
 Quirky Case Law
Fundraising Events Tax & VAT
Exemption
1. Event organised and promoted exclusively for
charity by charity or wholly owned trading
subsidiary
2. No more than 15 events of the same type in
the same location within any one financial
year – disregarding events where gross
income is £1,000 or less in a week.
3. Event cannot include more than 2 nights
accommodation
Fundraising Events Tax & VAT
Exemption
1. Examples: film, sporting participation
(including spectators), dinner, concert,
dance, games of skill, fireworks displays,
jumble sales
2. Not street or house to house collections
3. What constitutes a location?
Tax & VAT Exemption Covers
1.
2.
3.
4.
Admission charges
Brochures
Sale of advertising space
Other items sold at the event (unless zero
rated)
5. Sponsorship payments
6. Raffles (NB auctions are zero rated)
Does not cover sponsorship payments of event
participants!
Gift Aid on Entry Fees?
 Only if there is a suggested entry fee and
people cam attend whether they pay the
fee or not; or
 The fee is sufficiently high so that the
benefits of the event are within the donor
benefit limits;I.e
 Donation up to £100 – 25%
 £101 - £1,000 - £25
 Over £1,000 – 5%
Charity Auctions
 Commercially available items – can be
bought using gift aid dependent on donor
benefit rules
 Not commercially available items - no gift
aid
 VAT – Sale of donated goods – zero rated
 Direct Tax – one off fundraising event – tax
free
Fundraising &
UK Commercial Challenge Events
 Rules for London Marathon, Great North Run etc.
 Where charity requires a minimum sum of
sponsorship or a registration fee there is a sale for
VAT purposes
 VAT must be charged/included in sale price and
registration fee
 Target sponsorship is not a sale for VAT
 If you do not raise £x you cannot run means £x is a
sale price
Fundraising &
UK Commercial Challenge Events
 Charity must pay VAT charged on “Sales” but can
recover VAT on cost of gold bonds and other costs
 Charity must not provide “substantial benefits”
 Pre race advice, T shirts/vests, pasta parties, post race
massages, drinks, meals, and prizes for top fundraisers
are not “substantial”
 Hotels, accommodation, free gifts for all are “substantial”
Fundraising &
UK Commercial Challenge Events
 More information in VAT Notice
701/1 “Charities”
Fundraising and Charity Challenge Events
- Old Rules
 VAT is payable on “the margin” - I.e. difference
between cost of event and the minimum
sponsorship required to take part.
 Charity is a travel agent - so no VAT recovery on
cost of tour; VAT can be recovered on general
overheads.
 In Summary -provided participant contracts direct
with the travel agent and charity simply publicises
and acts as a payment agent – no VAT. If charity
provides tour itself and in the EU - VAT on margin.
 No VAT on sponsorship, no VAT recovery on
costs
Charity Challenge Events – New Rules
 New Rules For Contracts signed or events publicised (if
earlier) from 31 July 2008.
 Minimum sum required to take part? “No” - then no
VAT! There is no “supply”. If “Yes” then
 Does the event include bought in accommodation, or a
package of both travel and accommodation? If “No”  Possibly eligible for fundraising exemption (does the
event include more than two nights accommodation
from own resources)? “No” - then VAT exempt under
the one off fundraising events exemption.
Challenge Events - New Rules
 If there are more than 2 nights accommodation the
Tour Operators Margin Scheme Applies - VAT
charged on the margin.
 If the answer is “Yes” to “Does the event include
bought in accommodation, or a package of both
travel and accommodation?” then
 Is the charity acting as principal or undisclosed
agent, or as disclosed agent?
Charity Challenge Events – New Rules
 If disclosed agent then VAT due on “commission”
payable by tour provider; VAT reclaimable on all
associated costs. BUT
 If the charity is acting as principal or undisclosed agent  Then VAT is due on the margin (difference between cost
of the event and minimum sum to take part)
 BUT If the event takes place outside the EU the margin
is zero rated for VAT.
Charity Challenge Events – New Rules
 Changes introduced because of perceived
charity competition with Tour Operators &
Travel Agents
 Consider how you run your challenge events
– undisclosed agent and run events outside
the EU is possibly best and easiest route.
This is complicated - where can I get help?
 Appendix “Update 2” at back of HMRC
VAT Notice 701/1 - Charities
Don’t forget the Gift Aid
 Sponsorship by non-connected persons can be
gift aided
 Value of services will exceed max gift aid benefits
 No gift aid by participant or connected person up
to value of services
 Additional gifts by participant and connected
people can be gift aided
 Identifying value
Connected Persons Are
 Wife or husband
 Relative (brother, sister, ancestor, lineal
descendant
 Wife or husband of a relative
 Company under control of donor or
connected persons
How Much Gift Aid?
 HMRC Example
 Event cost: £1,200
 Min sponsorship £2,500
 Participant pays £1,200
 Balance can be gift aided by participant
and connected people
Gift Aid Declarations
Recommended formats on HMRC website
for:
 Gift Aid declaration
 Sponsorship form with gift aid declaration
 R68 claim form
Audit trail – match cheque from participant
with total on sponsorship form
VAT & Corporate Sponsors
 Donations – outside the scope of VAT
 If sponsor simply asks for
acknowledgement – no VAT
 If sponsor requires use of their name &
logo – this is advertising, non charitable
activity.
 Ensure 10% of sponsorship is run through
the trading company as a fee for the
advertising service with VAT charged.
Remaining 90% can be given as a
donation to charity.
What if Corporate Wants More?
 May have to consider more of the payment
from the sponsor being a fee subject to
VAT run through the trading company
 Consider on a case by case basis - get
advice.
 Likewise advertising charity’s name and
logo by corporate is subject to VAT.
 As are website links, product
endorsements, etc.
Light Relief - Quirky Case Law




The Jaffa Cake Case
Wheatgrass Juice
Mr Lumby’s Missing Beer
Fagomatic – is a Lamborghini a business
van?
 RNLI – Is it a necessary for a lifeboat?
 London Zoo – where HMRC belong?
Any Questions?