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When is a gift not a gift?

Photo of Kevin Russell Kevin Russell
4 min

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 some common examples:

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 ('FTCW'). 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.

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”.

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

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.

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.

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.

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.

 

Profile image of Kevin Russell
Written by

Kevin Russell

Kevin is one of Stewardship’s leading team of technical experts with over 25 years of experience of helping churches and Christian charities maximise their potential. His expertise and knowledge is sought not only by charitable organisations but by Government, the Charity Commission and HMRC, helping to solve complex tax and charity law problems.

Prior to working for Stewardship, Kevin had a wide range of business, charity and teaching experience and is a qualified chartered accountant, and a chartered tax advisor. At PwC he was a Senior Tax Consultant assisting medium and large businesses in all aspects of their tax affairs. Also a lecturer in the Business School at Middlesex University and Principal of his own Chartered Accountancy practice.

Kevin is Vice Chair of the Charity Tax Group and Chair of CTG’s Gift Aid & Giving Technical Group. He represents the Christian church on HMRC’s Charity Tax Forum and advocate for the sector to Government, the Charity Commission and HMRC.

Currently a trustee of the UK arm of an international charity that inspires people to discover Jesus for themselves. Past roles include church deacon, trustee and auditor and he has helped set up two church plants.

Kevin and his wife Carol have 3 adult children and one grandchild.  They attend Grace Church, Highlands in North London.

Causes close to Kevin and Carol’s hearts are those working directly with the homeless, with drug addicts, and women in prostitution. Organisations working in evangelism amongst young people, in family life and demonstrating Christian love in action in the public sphere.

 

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