The Serpentine Trust is a registered charity that ran an art gallery and operated schemes whereby the supporters could make annual payments to assist them.
To make the opportunity more appealing, the contributors received various benefits such as invitations to events, priority booking for events and complimentary exhibition catalogues.
HMRC considered that the sums paid by the supporters were consideration for the standard-rated supply of the benefits. The Serpentine Trust appealed, contending that the gifts were de minimis, meaning that they were not provided ‘for’ the payments; they should be apportioned between the part that was attributable to the benefits (the consideration) and the part that was in excess (a donation).
The tribunal found that the benefits had real value, which was likely to exceed the cost of providing them. There was a single supply to the supporter to partake in exclusive events and receive offers from the Serpentine Trust. That supply was entirely standard rated, therefore their appeal was dismissed.
Charities have a fine line to tread in regards to attracting donors to support their cause. In our competitive world, the third sector is under the same pressures as big businesses and they sometimes strive to go ‘the extra mile’. However, increasing the attractiveness of an offer can create its very own tax problems.
If you are uncertain about the VAT liability of your income streams, please contact our VAT specialist, Nigel Smith for an initial free consultation on 0191 2850 321 or firstname.lastname@example.org.