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When is a gift not a gift?

By Kevin Russell | 30 March 2016 | Comments (2)

When is a gift not a gift?

In general terms a ‘gift’ is something freely given, with no expectation of anything in return. If something is received in return, either contractually or as a reciprocal benefit, the ‘gift’ is not actually a gift.

In the context of charitable giving the Gift Aid rules do not permit a giver to receive a benefit ‘in consequence of making their gift’ other than where it is very small and within so called ‘de minimis’ rules. Donations that pay for a contractual obligation are also not gift-aidable.

This is why sometimes we need to ask detailed questions before agreeing to make a donation from a giver’s account to the recipient that they have nominated.

 

Let’s look at 7 common examples:

 

  1. Donations to individuals in, or studying for, Christian ministry

Where an individual makes a gift to another individual, clearly this cannot be gift aided as there is no charity involved. However, if the gift is made to Stewardship, Gift Aid can be claimed and the giver can ask for us to make a donation to the individual recipient.

Having made a charitable gift to Stewardship, we must make sure that the funds, including the tax reclaimed are used for charitable purposes only, under English law. Three occasions where we intervene to ensure this is the case are:

  • Donations from a close relative’s giving account to a Full Time Christian Worker. HMRC regard this as providing a benefit, by association, to the giver and therefore this is not permitted. The one exception to this is where the donation request is to fund ministry expenses – that is the cost of equipment, training, materials and other facilities relating to the FTCW’s ministry.
  • Total support for the FTCW exceeds a pre-defined amount. We set a cap on the total amount that a FTCW can receive from us each year, to ensure that this remains charitable in law. Donations that approach the cap will trigger a review and, in appropriate cases, an increase in the cap.
  • When we are asked to support a Bible College student, we make payment to the student rather than the college. Therefore, even if that support is used to pay tuition fees, there is no contractual payment.

 

  1. Donations to overseas causes

This is a complex area. But in general, it is not possible to make a gift direct to an overseas charity and claim gift aid relief. Rather, one can give to a UK charity for them to claim Gift Aid and for them to make the gift overseas. The charity would need to undertake additional checks required by HMRC for overseas payments first and must not be directed to make the payment to the overseas cause.

Further detail is given in our Briefing Paper, “Guide to Churches Making Payments Overseas”.

 

  1. Paying for mission trips

This is very dependent on the way that an organisation structures and communicates their mission opportunities. But, if there is a fee or minimum amount that participants must raise in order to participate, it is likely that gifts towards the mission trip will not qualify for Gift Aid.

For more detail on this, please refer to our Briefing Paper “When a Charity’s income is not its income

 

  1. Membership subscriptions & National Trust

Some charities such as the National Trust benefit from special legislation enabling membership subscriptions to be Gift Aided in respect of rights of admission to property. However, more generally, subscriptions cannot be Gift Aided where the benefits of membership exceed the permitted limit.

 

  1. Auctions

Buying an item at a charity auction is not a gift, but a contractual payment. However, where the amount paid exceeds the market value of the benefits procured, it may be possible to Gift Aid the overpaid portion of the payment. This is called the ‘split payments rule.’ Further explanation of this can be found on the Gov.uk website.

 

  1. School fees

Payment of school fees, even if the school is a charity, cannot be made under Gift Aid since this is a contractual payment; nor should other charities make payments for fees of specified students from Gift Aided funds. It is however possible to fund bursaries for students more generally.

 

  1. Gifts with conditions

Where the donor places conditions on the use of their gift, the gift is potentially disqualified for Gift Aid purposes. The analysis here is tricky and readers are recommended to read our Briefing Paper “When a charity’s income is not its income” for a detailed explanation of this including the distinction between ‘restricted fund’ donations and conditional gifts.

 

In addition to those noted above, Stewardship publishes a series of other helpful Briefing Papers and Briefing Notes available at:

stewardship.org.uk/resources/briefing-papers

Posted by Kevin Russell

Our Legal Eagle guru and Stewardship's Technical Director, Kevin constantly has his finger on the pulse of all things tax and charity law-related. His briefing papers for charities, churches and individuals are an invaluable resource on everything from VAT to Gift Aid. 

comments:

Vino Michael

January 29, 2020 5:04 PM
Hi Kevin,

Great article, appreciate your contribution to this !

Could I ask if I am eligible for GiftAid if I am fundraising to go an international trip with a charity?

Thanks,
Vino

Kevin Russell

January 30, 2020 3:54 PM
@Vino

Thank you for your comment. This is broadly covered in Point 3 of the article and in examples 3 and 4 of Section 7 of the Briefing Paper "When a Charity's Income is not its Income" (linked above).

To be Gift Aidable, you would need to be fundraising for the charity and not for yourself. The charity would not be able to claim gift aid on any funds raised to pay for any fees, travel costs etc for the trip that they levy on participants as a condition of going on the trip.

In contrast, if your place on the trip is secured anyway and then the charity asks you to raise funds for the charity generally then these can probably be Gift Aided.

BUT, the question is very much nuanced on the precise facts of each case. You (or more probably, the charity) should take specific professional advice, if the Gift Aid is material to the outcome of the trip.

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