Finance: Advice line - Pesh Framjee on finance and governance

Q. We are setting up a membership scheme. Will our members be able to make payments under Gift Aid?

Some charities set up membership schemes but are in fact receiving only donations. Donors might be called supporters by one charity and members by another. In practice, these 'members' are actually committed givers.

If your membership scheme confers rights and benefits, you will have to consider these carefully. Only outright gifts can qualify for Gift Aid - payments in return for goods and services cannot be made under Gift Aid. If the donor, or a person connected with the donor, receives any benefits in consequence of making the donation that exceed the limits set out in the donor benefit rules, then the payment will not qualify for Gift Aid.

Inland Revenue guidance states that "membership subscriptions are not gifts; they are made to gain access to a charity's facilities and services. However, we are prepared to treat membership subscriptions as gifts if they meet the following conditions: first, that the payments do no more than secure membership of the charity; and, second, that the payments do not secure a right to personal use of any facilities or services provided by the charity.

"The provision to members of, for example, periodic newsletters explaining the work of the charity, or opportunities to visit and view its work, would not breach these conditions. A wildlife conservation charity that allowed members admission to its sites to view its conservation work would not be regarded as providing services or facilities for personal use."

The Inland Revenue adopts a 'pay now, check later' approach, and can claw back tax for wrong claims.

Pesh Framjee is head of the non profit unit at Deloitte and special adviser to the CFDG. No liability arises to the author, his firm or Third Sector. Send your questions to pesh.framjee@haynet.com.

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