Gift Aid on memberships: Panacea or Pandora's Box?

Background

Clubs are often looking for ways to increase their income. Each of registered charity and community amateur sports club (CASC) status can confer on clubs a number of financial benefits. One of the most prominent benefits is Gift Aid on donations, both individual and corporate. However, knowing how and when to take advantage of the Gift Aid Scheme is something which a lot of clubs often require assistance with. It's important to understand, and stick to the basic principles of, the Scheme in order to make the most of it.

One burning question crops up more than any other with grassroots clubs registered as charities or CASCs is –  can we claim Gift Aid on our membership fees?

HMRC advice

In order for Gift Aid to apply to a membership subscription (including for a junior member) it must be a "qualifying gift".

Put simply, a payment which in return secures goods or services or provides use of facilities is not a qualifying gift.  So clubs should always ask whether they are giving anything "in return" for the making of any financial contribution?  If so, it's most likely not a gift (although certain rules apply in relation to donor benefits which are beyond the scope of this article).

HMRC guidance clearly states that CASCs can't claim Gift Aid on membership payments because members are given personal access to the club’s facilities (e.g. pitches) or services (coaching).

Similarly, Gift Aid can only be claimed on a payment to a charity where the donation does no more than secure membership of the charity, rather than a right to personal use of any facilities or services provided by that charity. "Personal use" includes individual use or use as part of a group. This has particular relevance to grassroots clubs, where weekly coaching and use of club facilities form an integral part of membership benefits.

Junior members, in particular, often have their membership fees paid on their behalf, for example, by a parent or guardian. This raises two issues for clubs thinking about whether or not they can claim Gift Aid on junior members' "subs"; namely:

(i)    how do you treat payment(s) made by a third party?

The HMRC guidance, which can be found here, states that "the payment to a charity to secure individual membership rights for a person other than the donor aren’t gifts to the charity. This includes an individual membership purchased for a family member (spouse, parent etc.) that’s not secured as part of a family membership scheme. This is because although the payment is made to the charity, the gift is to the person whose membership subscription is being paid."

(ii)    does the fact that the payment is made on behalf of a minor (children under 18 years of age) make any difference?

In short, only a payment which satisfies the necessary conditions in order for it to be treated as a qualifying gift (i.e. as if it were made in respect of the donor personally) will be accepted as a gift if it’s made for or on behalf of their minor child.

Unfortunately, a subscription payment for a junior member does not therefore qualify in two respects – firstly, since the financial contribution is made by a third party (e.g. parent or guardian), and secondly, because the child will invariably receive benefits (e.g. coaching and access to club facilities) which go beyond purely securing membership of the charity.

Conclusion

Clubs should ensure they are clear on the circumstances in which Gift Aid may be claimed. Only subscriptions which confer membership only will be regarded as donations. Clubs should familiarise themselves with the guidance provided by HMRC.

But that doesn’t mean charitable clubs cannot take advantage of Gift Aid. Clubs can still invite discretionary donations from members, supporters and the wider community, bearing in mind that any donation to a charitable club must:

(a)    satisfy HMRC criteria as a qualifying gift; and

(b)    be made genuinely over and above (and entirely separate from) any member subscriptions on a discretionary basis by the donor.  This must be voluntary.

If in doubt, clubs should always seek professional advice before proceeding.

For more information, help or advice in this area please contact Chris Hook using 0191 211 7801 or [email protected].