Changes have been made to chapters 3.18 to 3.25 of the HMRC Charities guidance to clarify when and how donor benefits should be treated and how they are valued for Gift Aid limits. CTG has been involved in an HMRC working group reviewing draft guidance, although HMRC retained control over the final content.

On a positive note, there are a number of helpful changes, incorporating comments by the working group, including:

• representing the relevant value test as two not three thresholds (as originally proposed in CTG’s consultation response) [3.21.1]
• applying the disregard to electronic literature as well as physical literature [3.24]
• a more flexible approach to valuing benefits where there is no commercial value (ie a non-ticketed event) noting a fair and reasonable method of valuation will suffice [3.23.5].

However, we are disappointed that none of our suggested changes relating to the in consequence rules and split payments rules have been taken forward. We will also be seeking further clarification from HMRC on changes to section 3.19.7  fundraising events in honour of a donor and 3.19.8 on naming rights.

In respect of the in consequence rule, at present we do not believe the guidance is clear enough for taxpayers leaving too many uncertainties. It currently states at 3.18.4 “A benefit is ‘associated with a donation’ if it’s received by the donor or a connected person in consequence of making the donation. In other words, there has to be some connection between the fact that the donor has made a donation and the benefit being received”. To this end we proposed a more detailed overview of when a benefit can reasonably be determined to be in consequence of a donation. In our view, the review of the donor benefits guidance promised by the Government will not be complete without a more substantive discussion on this point.

HMRC officials have indicated to CTG that they have been unable to establish that there is an issue with this legislation and its explanation in guidance across the wider charities sector. It is therefore HMRC’s view that we should retain the wider interpretation of the current legislation and not narrow the scope of the current interpretation of the legislation, by further defining ‘in consequence’ in guidance. If your charity or client finds the in consequence rule difficult to understand or apply to practical situations please let us know at info@charitytaxgroup.org.uk.

In respect of the split payments rules [3.25], we relayed feedback from members that it is not always practical for charities to have to be able to make a benefit available to be purchased separately in order for the split payment to work, suggesting that being able to value it is sufficient. HMRC officials have responded: “The split payment rule is only used when the market value of the benefit package, exceeds the donor benefit limits. In order to enable a charity to apply this rule, the benefit element of the package must be distinct and separate from the donation made. If the benefit package can only be purchased by individuals who also make a donation, this distinction between the elements is lost. Therefore the benefit is only available as a consequence of making the donation.”  It would be helpful to know whether members feel that this should be pursued further.

HMRC has also confirmed: “During HMRC’s wider review of the concessions within our guidance, HMRC formed the view that the split payment rule could be operated within our current interpretation of the legislation. In other words it did not require to be legislated. The detail contained within the guidance on how to apply this rule therefore remains unchanged.”

Please send any comments on the changes to the guidance to info@charitytaxgroup.org.uk.