In April 2020, due to the impact of Covid-19 on charities, HMRC announced a temporary change to the rules around Gift Aid. Charities could claim Gift Aid on tickets sold for events, should the attendees choose not to request a refund.
This rule has now become permanent, so we wanted to dig into it and make sure you know what options are available to you if you were due to hold a fundraising event which has since been cancelled.
Gift Aid allows charities to increase the value of donations
Gift Aid is a great scheme for charities, and means millions of pounds of additional money goes to the charities and causes people care about.
If a taxpayer gives to your charity through Gift Aid, your charity (or community amateur sports club) is able to claim an extra 25p for every £1 of donation, without any extra cost to you.
The way it works: because tax has already been paid on the donation, and charities are exempt from tax, Gift Aid claims back the tax from HMRC and gives it to you.
If ticket purchasers are happy to waive the refund of the ticket fee, this can be treated as a donation for Gift Aid purposes
So here’s how Gift Aid works in relation to your cancelled event.
If you were due to hold a fundraising event (which has since been cancelled) and members of the public have already bought tickets, you can treat the ticket cost as a donation with the ticket holders consent.
It is up to the registrant whether or not they want their money back. If they do request a refund, you’re unable to use the money as a Gift Aid donation. However, if they’re happy to waive the refund, it can be treated as a donation for Gift Aid purposes. Many charities who claim Gift Aid on donations are already following the process to let registrants choose.
How to approach the transferring the cost of a ticket to a donation
HMRC are very clear that this applies to:
- Any ticket for a charity event which has been cancelled due to the coronavirus (COVID-19).
- It does not apply if the charity event has been postponed and not cancelled, any tickets for that event are not eligible for the temporary changes.
Charities will need to be able to show that the individual agreed to treat the refund as a donation and that they have completed a Gift Aid form.
To do so, follow this process:
- Contact all registrants who purchased the ticket for your cancelled event.
- Explain that they are entitled to a refund, but give them the option to donate the cost of the ticket to the charity instead. Make it very clear that they’re not obligated to donate their ticket cost, but if they do choose to go ahead, it’s a non-refundable option.
- Make sure the individual has enough tax to cover the donation by getting them to confirm this on the form
- Make sure to keep a record of the conversation with the individual.
- Make sure the individual fills in their details for a Gift Aid declaration
Make use of all the opportunities available to you in these challenging times
Some charities will have had considerably more recognition than others during Covid-19, and we know it has been a tough time for many. We understand you want to get the maximum return from every single donation and investment.
If you’re struggling to manage cash flow, to fundraise consistently during lockdown, or want to hear about all the funding opportunities available to you, we recommend checking out our hub for Charities. There’s a lot of useful information to help you manage your finances, and a team of Charity specialists on hand should you need some advice.