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Claiming Gift Aid on tickets for events cancelled due to COVID-19

The Chairman of the Charity Tax Group (CTG), John Hemming, wrote to the Chancellor on 19 March 2020 requesting immediate support for charities through the tax system during the COVID-19 pandemic. This included a proposal to allow charities to keep Gift Aid for cancelled events, a measure that has been supported by a number of CTG members including the Arts Council.
Allow Gift Aid on donations in lieu of cancelled events/debts etc
On an exceptional basis, for the duration of the coronavirus crisis, HMRC should allow Gift Aid to be eligible on any refund donated to charities in lieu of cancelled tickets or debts not to be collected. While Gift Aid would not ordinarily be eligible on such gifts this would help to recognise the generosity of the British public and incentivise them to not seek refunds from charities, which are already struggling with cashflow issues. The amount being gifted is clearly a donation and freely given and no benefit is being granted to them as the event has been cancelled. There is precedence for such a mechanism through the Retail Gift Aid scheme and this would be a quick and effective measure in support of charities and donors.

A recent response by the Government to Parliamentary Question indicated that the Government would allow this (certainly in respect of theatres and other cultural venues), but CTG liaised with HMRC and DCMS to confirm the broadest application of this relief.

HMRC has now published guidance (reproduced below) which incorporates suggestions made by CTG in a proposed framework to officials.

John Hemming, Chairman of the Charity Tax Group said: “CTG welcomes the announcement that the  Government will allow Gift Aid to be applied to all tickets for events cancelled by COVID-19. This was a leading proposal in a recent CTG letter to the Chancellor and is a practical solution to  unlock important tax reliefs for charities at a time when cashflow is under serious strain. CTG is grateful to HMRC officials for agreeing to implement this concession in a simple format that will be easy for charities and donors to follow”.

UPDATE: We are very pleased to report that having given further consideration to the matter, and having taken fresh legal advice, HMRC has confirmed to us that it will be making this change in view permanent, so that any such waivers of refunds (including waivers of loans to charities) can count as donations to which Gift Aid can apply, provided the agreement to waive the loan/right to a refund is clear and irrevocable. Updated guidance will be issued shortly, but this is a very welcome development.

Processing ticket refunds for cancelled charity events during the coronavirus (COVID-19) pandemic

To help reduce administrative burdens on charities, if a charity event is cancelled due to coronavirus (COVID-19), HMRC will accept that where a person due a refund decides to donate this to a charity, the requirements of S416 ITA07 are met provided:

  • the individual
    • does not receive a benefit as a result of their donation
    • agrees that the cost of their ticket becomes a donation
    • completes a Gift Aid declaration
  • the charity keeps an audit trail, including a copy of the agreement from an individual agreeing to the donation of the cost of the ticket

The charity no longer has to physically refund the ticket price for the individual to re-donate.

Events impacted by the change

Any ticket for a charity event which has been cancelled due to the coronavirus (COVID-19) is eligible for these temporary changes.

Events not impacted by the change

If the charity event has been postponed and not cancelled, any tickets for that event are not eligible for the temporary changes.

Process to follow

The charity must:

  • contact the individual who previously purchased the tickets of the cancelled event
  • explain that the individual is entitled to a refund but may wish to donate the cost of the ticket to the charity
  • make it clear that the individual does not have to donate the refund but if they choose to donate it, it’s non-refundable
  • make sure the individual has enough tax to cover the donation
  • document the conversation with the individual and keep records of this
  • ensure that there is a Gift Aid declaration in place for the individual

Challenge Events

A number of fundraising charities have asked CTG whether Gift Aid can be claimed on challenge events for which there will be registration fees (instead of tickets) that would be refundable, if the event is cancelled. CTG’s initial reaction was that it should be possible as it was within the spirit of the measure, but we asked HMRC for confirmation and the response was positive.

HMRC response: We are happy to confirm that where such events are cancelled due to Covid-19, provided the same approach is taken as previously advised, e.g. where a ticket holder, instead of receiving a refund, donates the money instead, we will relax our usual approach. Under this temporary relaxation, where individuals choose to donate their refunded ticket/entry money, we will accept that the donation is potentially eligible for Gift Aid without the money having to be physically returned. A charity will need to retain copies of exchanges between themselves and the donor, specifying the amount that is being refunded/donated and the donor’s agreement to making a donation. Requests must not only ask whether a customer wants to make their donation under Gift Aid, but they must be asked to confirm that they are a UK taxpayer and have paid sufficient income tax or Capital Gains Tax to cover the donation (the standard wording of the Gift Aid declaration). All other requirements are as previously advised to yourselves.