Gift Aid: Charities’ ability to claim on membership subscriptions at risk
· Posted on: January 24th 2024 · read
On 25 April 2023, the House of Commons introduced the digital markets, competition and consumers bill, which, Civil Society reports, seeks to “regulate and increase competition in digital markets”.
The bill aims to tackle ‘subscription traps’ by imposing new duties on traders, and give protection to consumers who make advance payments. If enacted, the bill would enable consumers to cancel subscription contracts within a 14-day ‘cooling-off’ period if they changed their minds or did not like the product.
However, there is an unfortunate possible side effect of this bill. Charity professionals have expressed concerns as there is ambiguity over whether a consumer’s right to cancel a subscription represents a ‘condition of repayment’; there is a statutory requirement under Gift Aid for payments to be ‘gifts’, meaning that Gift Aid cannot be claimed on any amount which is subject to a condition of repayment.
Charities which claim Gift Aid on members’ subscriptions under specific HMRC provisions are being encouraged by the Charity Tax Group to calculate the financial impact the enactment of the bill would have to support its efforts in lobbying Government to amend the bill.
The bill continues its journey towards becoming and act and is not expected to receive ascent and be effective until 2025, so whilst there is no immediate concern this is certainly something to keep your eye on.
Facebook and Instagram fundraising: transfer of Gift Aid compliance risk
Since November 2023, when an individual donates to a charity through Facebook or Instagram, the donation is legally made to PayPal Giving Fund (PPGF).
Gift Aid claims are then made by PPGF in its own right and, subject to due diligence tests, the gross donation is then passed on to recipient charities as a grant.
As a result, the Gift Aid compliance risk now lies with PPGF instead of the recipient charity.
Following this transition, and in light of the number of questions for charity fundraising and finance teams around how the new arrangements work in practice, the Charity Tax Group organised a meeting in December 2023 between members of its Gift Aid Practical Issues Working Group and representatives from PayPal.
A recording of the meeting can be found here.
