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Charity memberships and tax

Practical Issues
VanishingPint
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Charity memberships and tax

#335085

Postby VanishingPint » August 22nd, 2020, 2:52 pm

Hi,

I've been wooding about something that cropped up in discussion with an older relative.

National Trust do tax deductible lifetime memberships. From my understanding the trust claim 20% tax back using gift aid, and the donor can claim a further 20% on their tax return.

Assuming someone earns over 100k for tax purposes, the tax free earnings allowance withdrawal makes further income taxed at something around 67% rate.

Am I correct in my understanding that buying the aforementioned lifetime membership while paying tax on over 100k of earnings would mean the NT would claim back 20%, the tax payer would claim back 20% plus have a lower deduction of their tax free earnings allowance?

Howard
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Re: Charity memberships and tax

#335090

Postby Howard » August 22nd, 2020, 3:09 pm

Yes, if you look at https://www.gov.uk/donating-to-charity/gift-aid

You will find this example:

Example
You donate £100 to charity - they claim Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).

I did this around 30 years ago and bought Mrs H life membership of the National Trust. We have enjoyed this privilege ever since.

By coincidence HMRC did query my tax claim that year for the nice reason that (as a higher rate tax payer) I had, in addition to the NT payment, donated quite a lot to some charities. I'm pleased to say that after their brief investigation they confirmed that all was in order and have not queried any tax return since.

(I am pretty sure that HMRC do check significant gift claims with the charities who have benefited).

regards

Howard

Lootman
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Re: Charity memberships and tax

#335092

Postby Lootman » August 22nd, 2020, 3:18 pm

Howard wrote:You donate £100 to charity - they claim Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).

I did this around 30 years ago and bought Mrs H life membership of the National Trust. We have enjoyed this privilege ever since.

By coincidence HMRC did query my tax claim that year for the nice reason that (as a higher rate tax payer) I had, in addition to the NT payment, donated quite a lot to some charities. I'm pleased to say that after their brief investigation they confirmed that all was in order and have not queried any tax return since.

(I am pretty sure that HMRC do check significant gift claims with the charities who have benefited).

I was under the impression (possibly quite wrongly) that to be valid for tax purposes a gift had to be a genuine donation, meaning that you should not receive anything in return.

So a donation to a charity certainly counts. But if you purchase a membership that comes with a number of benefits and privileges, then it may not be valid for tax purposes, even if that entity is a charity, because there is consideration.

Since HMRC allowed your gift after an investigation I assume I am wrong about that idea, at least for NT. The OP specifically mentions "tax deductible lifetime membership".

dealtn
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Re: Charity memberships and tax

#335096

Postby dealtn » August 22nd, 2020, 3:33 pm

Lootman wrote:So a donation to a charity certainly counts. But if you purchase a membership that comes with a number of benefits and privileges, then it may not be valid for tax purposes, even if that entity is a charity, because there is consideration.



See 3.37.2 and 3.37.3

https://www.gov.uk/government/publicati ... scriptions

You are only able to secure tax relief on "Gifts". However if that Gift secures you right to membership of a charity, and you don't acquire additional rights to those who pay for access to the services and activity of the charity, then gift aid is allowable.

As a rule of thumb if what you pay for by way of membership acquires you the same benefits, plus the right to vote in the AGM, and nothing in addition, your membership is allowable for tax relief. So it depends on what those "number of benefits and privileges" are.

In essence you are not buying membership but making a Gift, and acquiring "free" membership of nothing more than what is alternately available to those choosing to pay for something in an alternative form. Most schemes you would think ensure their membership criteria fit the HMRC guidelines.

Dod101
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Re: Charity memberships and tax

#335116

Postby Dod101 » August 22nd, 2020, 4:29 pm

I take Lootman's point. If you pay a membership fee to say the National Trust, surely that confers the right to have fees waived for entry to its various properties. That then surely makes the membership fee not exactly a gift because you are getting a valuable benefit (if you like that sort of thing), but it seems the charity can claim Gift Aid on the fee. Is that correct?

Gift Aid was surely meant for just that; an unequivocal gift such as when I send some money to a cancer charity for instance.

Dod

scrumpyjack
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Re: Charity memberships and tax

#335122

Postby scrumpyjack » August 22nd, 2020, 4:49 pm

There are certain memberships that are valid for tax purposes but still confer a benefit on the giver. It may be that NT membership is one. Certainly being a 'friend' of Covent Garden is one and that allowed one to attend rehearsals and get tickets advantageously.

The way that higher rate tax deduction is achieved is that the taxpayers basic rate band is extended by the amount of the charitable donation and also I think it is taken account of in 'total income' which means your withdrawal of personal allowance calculation takes it into account if your income exceeds 100k

mc2fool
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Re: Charity memberships and tax

#335128

Postby mc2fool » August 22nd, 2020, 4:54 pm

Dod101 wrote:I take Lootman's point. If you pay a membership fee to say the National Trust, surely that confers the right to have fees waived for entry to its various properties. That then surely makes the membership fee not exactly a gift because you are getting a valuable benefit (if you like that sort of thing), but it seems the charity can claim Gift Aid on the fee. Is that correct?

Yes. See https://www.gov.uk/government/publications/charities-detailed-guidance-notes/chapter-3-gift-aid#chapter-339-gift-aid-on-donations-that-attract-a-right-of-free-admission-to-charity-property.


Howard
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Re: Charity memberships and tax

#335136

Postby Howard » August 22nd, 2020, 5:21 pm

Lootman wrote:
Howard wrote:You donate £100 to charity - they claim Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).

I did this around 30 years ago and bought Mrs H life membership of the National Trust. We have enjoyed this privilege ever since.

By coincidence HMRC did query my tax claim that year for the nice reason that (as a higher rate tax payer) I had, in addition to the NT payment, donated quite a lot to some charities. I'm pleased to say that after their brief investigation they confirmed that all was in order and have not queried any tax return since.

(I am pretty sure that HMRC do check significant gift claims with the charities who have benefited).

I was under the impression (possibly quite wrongly) that to be valid for tax purposes a gift had to be a genuine donation, meaning that you should not receive anything in return.

So a donation to a charity certainly counts. But if you purchase a membership that comes with a number of benefits and privileges, then it may not be valid for tax purposes, even if that entity is a charity, because there is consideration.

Since HMRC allowed your gift after an investigation I assume I am wrong about that idea, at least for NT. The OP specifically mentions "tax deductible lifetime membership".


I clearly remember the discussion with HMRC (one does!). The investigator told me that Life Membership of the National Trust was allowable for Gift Aid but he gave the example that purchase of gifts from a National Trust shop would not be.

By coincidence last year, I also checked, as Scrumpyjack has mentioned, the eligibility of the cost of becoming a friend of Covent Garden and this is also valid for Gift Aid. A nice perk was that they waived the rules and a day before the official booking opening, I was the first person to buy seats for the particular performance we chose for Christmas last year and had the choice of any box in the Opera House. No discount on the ticket prices though. Tax deductible or not, sadly I won't be forking out for it this year! :(

regards

Howard

Dod101
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Re: Charity memberships and tax

#335138

Postby Dod101 » August 22nd, 2020, 5:28 pm



Why Mmmm? It seems pretty clear and unambiguous. I am interested particularly because our local history association is a registered charity- no idea why but it technically qualifies. My question is do our annual subs attract Gift Aid? They confer a modest benefit which is the right without charge to attend our meetings of which there are about 9 over the course of a year. We have helpfully put a value on these, which is the cost to a visitor to attend any of them, so my argument is that the subscription is not a donation, but it is certainly not much different from the sub to say the National Trust which apparently is regarded as a donation.

Mmmm to that as well.

Dod

dealtn
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Re: Charity memberships and tax

#335142

Postby dealtn » August 22nd, 2020, 5:41 pm

Dod101 wrote:Why Mmmm?


Well, let's just say the link looked somewhat familiar, given I posted it an hour previously.

mc2fool
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Re: Charity memberships and tax

#335153

Postby mc2fool » August 22nd, 2020, 6:38 pm

dealtn wrote:
Dod101 wrote:Why Mmmm?

Well, let's just say the link looked somewhat familiar, given I posted it an hour previously.

Nope, different link. Yours was to section 3.37 "Membership subscriptions", mine was to section 3.39 which deals specifically with donations that get you free admission, which is what Dod was asking about in his post that I replied to. ;)

A reading of just the former (esp. 3.37.1..3) could easily lead one to believe the latter wasn't allowed, but 3.39 makes clear when it is.

tjh290633
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Re: Charity memberships and tax

#335188

Postby tjh290633 » August 22nd, 2020, 10:41 pm

Dod101 wrote:


Why Mmmm? It seems pretty clear and unambiguous. I am interested particularly because our local history association is a registered charity- no idea why but it technically qualifies. My question is do our annual subs attract Gift Aid? They confer a modest benefit which is the right without charge to attend our meetings of which there are about 9 over the course of a year. We have helpfully put a value on these, which is the cost to a visitor to attend any of them, so my argument is that the subscription is not a donation, but it is certainly not much different from the sub to say the National Trust which apparently is regarded as a donation.

Mmmm to that as well.

Dod

All the charities to which I subscribe get Gift Aid. This includes the Church, various societies, college, school, etc. If your society is a registered charity, then your subscriptions should be eligible for Gift Aid. Paying to attend functions does not qualify, but you can always make an additional contribution which does. Most issue a magazine or newsletter, which is covered by the subscription, like those from the National Trust or the RSPB.

Your Hon Treasurer ought to look into the matter.

TJH

genou
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Re: Charity memberships and tax

#335259

Postby genou » August 23rd, 2020, 1:47 pm

VanishingPint wrote:Hi,

National Trust do tax deductible lifetime memberships.


Not according the to them. https://www.nationaltrust.org.uk/features/gift-aid ;

Please note that we cannot reclaim tax on individual life membership, individual senior life membership or gift membership subscriptions

As a random sample, English Heritage agree that you can gift aid annual membership, but not Life.

yorkshirelad1
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Re: Charity memberships and tax

#335267

Postby yorkshirelad1 » August 23rd, 2020, 2:24 pm

genou wrote:
VanishingPint wrote:Hi,

National Trust do tax deductible lifetime memberships.


Not according the to them. https://www.nationaltrust.org.uk/features/gift-aid ;

Please note that we cannot reclaim tax on individual life membership, individual senior life membership or gift membership subscriptions

As a random sample, English Heritage agree that you can gift aid annual membership, but not Life.


I'm glad someone else has popped up and mentioned this as I came up against this a few years ago. I found out that NT joint life membership can be GiftAided. The explanation I finally got from NT (in 2009, things may have altered in the intervening 10 years) was:
National Trust wrote:If you are thinking of becoming an Individual Life member, you cannot Gift Aid as you are allowed to take a guest on an 'Admit Two' card, which you would receive. This category is not eligible because there are limits to the level of benefit a donor may receive. In the case of National Trust membership, the benefit of free admission to the donor and his/her family is disregarded, but not free admission to third parties. The Inland Revenue has ruled that the guest admittance facility provides a wider right of admission than is permitted under the Gift Aid legislation, and that these subscriptions cannot therefore be considered as donations. A Joint membership would be eligiblr for Gift Aid as each person gets one 'Admit One' card each and cannot take a guest.

genou
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Re: Charity memberships and tax

#335273

Postby genou » August 23rd, 2020, 3:10 pm

yorkshirelad1 wrote: A Joint membership would be eligiblr for Gift Aid as each person gets one 'Admit One' card each and cannot take a guest.


That makes sense. So the OP can achieve their aim if they select the correct membership. The English Heritage LM carries a guest, hence their position.

richlist
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Re: Charity memberships and tax

#335285

Postby richlist » August 23rd, 2020, 4:04 pm

RHS annual individual membership allows you to take one guest......and that can be gift aided. ????

genou
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Re: Charity memberships and tax

#335292

Postby genou » August 23rd, 2020, 4:36 pm

richlist wrote:RHS annual individual membership allows you to take one guest......and that can be gift aided. ????



The plot thickens. In order to claim Gift Aid, HM Revenue and Customs’ rules state that the benefits of membership can only be taken by the donor and their family. So all new RHS members will continue to be able to take a guest to an RHS Garden for free, but this guest must be someone in their family.

That's close to NT rules, but doesn't feel like a "joint" membership. Clearly there's an internal HMRC guidance that we haven't found.

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Re: Charity memberships and tax

#335294

Postby GPhelan » August 23rd, 2020, 4:59 pm

Some years ago the RHS were encouraging members to Gift Aid their subscriptions but made just that point namely that the 'guest' to one of their gardens must be a family member. That was not attractive to me since I have no local family members but many local friends, so I have not gift aided my subscription.

richlist
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Re: Charity memberships and tax

#335298

Postby richlist » August 23rd, 2020, 5:25 pm

So, all the NT need to do to permit gift aid across all classes of membership is to limit guest admittance to family members as the RHS does.

Id have thought the benefits (increased income) of making that small change would far exceed any disadvantages ( less people seeking life membership).

That's that problem solved......let's move on to world hunger.


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