Donor Benefits - VAT

 It is not unusual for charities, particularly those in the heritage, education, and culture sectors, to attract donations by means of minor benefits in return for specific suggested donations. They are usually called 'committed giving schemes', or perhaps 'friends' schemes'.

We have, for a long time, understood that there is a significant VAT danger in such arrangements. Following the twenty year old decision in the case of Tron Theatre it is established case law that where benefits are offered in return for a 'donation' then, irrespective of the intrinsic value of those benefits, VAT can be chargeable on the full payment made in return, which equates in effect to the full donation. This contrasts somewhat misleadingly with the gift aid rules which only give rise to a tax disadvantage where the value of the benefits (on an intrinsic basis) exceeds certain parameters. The only way around this, subject to obtaining HMRC's clearance for something more benign, is to