Your charity may organise adventure fundraising events such as overseas treks or bike rides where you pay a third party to arrange the event. The payment to the third party covers all a participant’s costs (travel, insurance, provision of specialist equipment, food, accommodation etc). You may then ask the participant to pay a non-refundable deposit/registration fee and to raise sponsorship funds of a minimum set amount to support the charity, in return for going on the event.
The following sets out the circumstances in which Gift Aid applies to sponsorship payments raised for a charity by participants in these types of adventure fundraising events.
Benefits of participation
When someone gives a donation to your charity, they (or people connected to them) may receive something in return – a “benefit”. As long as the value of the benefit doesn’t exceed certain limits, the donation will qualify for Gift Aid.
In the case of adventure fundraising events, the participant usually receives a benefit as they don’t pay the full cost of the trip themselves; they may receive free accommodation, air tickets, meals etc. The value of the benefit is the cost of the event, less any payment the participant personally makes towards the cost of the event. Where the value of the benefit exceeds the permitted level for the donation made by a person connected to the participant, Gift Aid will not be available.
Payments made by participants
Gift Aid only applies to voluntary donations of money. If your charity is organising an adventure fundraising event and is charging a participant to take part, for example by asking for a registration fee or a non-refundable deposit, the payment is not voluntary and therefore does not qualify for Gift Aid.
If a participant personally pays the full cost of taking part in the event or trip, that payment does not qualify for Gift Aid. However, any subsequent voluntary donation made by the participant or any other person will qualify, as long as all the qualifying rules of the Gift Aid scheme are met.
Payments made by sponsors
Sponsorship payments made by people who are connected to the participant will usually fail the donor benefit rules – where the participant receives a benefit – and so will not qualify for Gift Aid.
Sponsorship payments made by people who are not connected to the participant can be made under Gift Aid. So, if all the sponsorship raised by a participant is donated by persons not connected to the participant then all of those individual payments qualify for Gift Aid.
If the participant pays the full cost of the trip then all sponsorship paid, whether by connected persons or otherwise, can qualify for Gift Aid as there is no benefit to the participant from the sponsors’ donations.
A person is ‘connected to the participant’ if they are:
- the participant’s husband, wife, civil partner or linear relative, for example, son, daughter, parent, grandparent or grandchild
- any linear relative of the participant’s wife, husband or civil partner
Sponsorship payments made by companies
Companies controlled by participants and persons connected with them are connected with the participant. If a participant receives a benefit in excess of the allowed limit in connection with a donation from a company they’re connected with, then no relief is due for that donation. Charities should note that no Gift Aid repayment is available for company donations. Instead the company gets relief through its Corporation Tax computation.
The value of benefits must be equal to or less than the following limits:
|Benefit limits for donations|
|Amount of donation||Maximum value of benefits|
|£0 – £100||25% of the donation|
|£101 – £1,000||£25|
|£1,001 +||Made before 6 April 2011||5% of the donation (up to a maximum of £500)|
|Made on or after 6 April 2011||5% of the donation (up to a maximum of £2,500)|
The benefit limits listed above are for Gift Aid purposes only. For VAT purposes, a donation is a voluntary payment for which no benefit is given in return. If you give a donor a benefit in return for a payment the normal VAT rules apply, and the full amount paid is consideration for a supply of goods or services.
How to apply the Gift Aid rules
Your charity should take all reasonable steps to ensure that payments received from people connected to a participant who has received a benefit, they are not treated as Gift Aid payments. HM Revenue & Customs (HMRC) recognises that, in practice, you can’t accurately check whether a participant and their sponsors are connected.
However, HMRC does expect your charity to include an explanation to participants who will be receiving a benefit, that donations from sponsors connected to them don’t qualify for Gift Aid, and include a definition of a connected person in the event literature and on the sponsorship form. HMRC has a model sponsorship form that you can use and adapt to suit your needs.
If you would like any further information or assistance with Gift Aid, then please contact Simon Brown at firstname.lastname@example.org or on 0191 285 0321.