Bill Lewis offers some insights into revised guidance on Gift Aid for Visitor Attraction Charities.
Gift Aid cannot be claimed on donations to charity when the donor in return receives benefits from the recipient charity above certain small amounts. The Gift Aid rules introduced in 2000 explained that the benefit was ignored if the donation brought entitlement to free or reduced-price admission to view wildlife or heritage property where the charitys main objects were the preservation of the wildlife or heritage property concerned.
Many visitor attraction charities therefore gave visitors the option of paying an entrance fee or instead of making a donation of an amount equal to the entrance fee that would entitle them to enter the attraction.
However, a few years ago some members of the government suggested that this was an abuse of Gift Aid which was a bit rich given that the government and not the sector created the rules! Even so, after discussions with the sector, the rules were modified. From April 2006 Gift Aid can only be claimed on donations that allow entry where either:
- the donation is at least 10% more than the usual entry fee, or
- where the donation entitles the visitor to enter the attraction at any time it is open to the public (apart from up to 5 days per year when it can be open for separately ticketed occasions).
Most charities have adopted the 10% route. However, a number of charities chose the annual ticket route, either because they are keen to foster repeat visitors, or, instead, because they are in tourist destinations where visitors probably only come once a year.
HM Revenue & Customs (HMRC) updated its Detailed Guidance Notes to reflect the new rules, but the new guidance was, unusually, quite brief and did not properly explain the HMRC understanding of the new rules.
If a charity takes the Annual Ticket route it must offer the ticket on equal terms to those who donate under Gift Aid and those who donate without Gift Aid. In effect, the charity must ask visitors if they wish to buy a ticket or make a donation and in return receive an annual ticket, and if the visitor wishes to make the donation then, and only then, they can ask the visitor if they wish to donate under Gift Aid.
This point was not explained in the Guidance. As a result one major attraction charity simply asked visitors if they wished to buy a ticket or make a donation under Gift Aid and receive an annual ticket. Annual tickets were not offered to those unwilling or unable to Gift Aid. A subtle difference, but one HMRC sees as being hugely important. HMRC initially tried to deny all the Gift Aid due to this charity over a 12-month period but eventually accepted that their guidance was deficient and that as a consequence the charity had been misled.
HMRC has therefore updated and considerably expanded its Detailed Guidance Notes to explain the above point and other areas. These include further explanation on the types of property and attraction charity that can obtain donations under gift aid in lieu of entry fees. There are also numerous practical examples.
The useful lesson from all of this is that if an HMRC Gift Aid auditor finds fault in an area not properly explained by his or her own Detailed Guidance Notes you can successfully claim you were misdirected.
Bill Lewis is Taxation Consultant at Bates Wells & Braithwaite.
w: http://www.bwbllp.com
The Guidance Notes referred to in this article can be found at this address:
w: http://www.hmrc.gov.uk/charities/guidance-notes/chapter3/sectionf.htm