Many NODA societies operate with an annual membership subscription model.Has your society reviewed its level of subscription fees lately?It may be worthwhile taking into consideration the latest guidance from HM Revenue & Customs on Gift Aid. Although membership subscriptions paid to a charitable society are not treated for accounting purposes as gifts, they can be treated as charitable donations for Gift Aid purposes, as long as all of the scheme’s conditions are fulfilled.
Using the Gift Aid scheme is a useful way of making the most of charitable donations, by allowing charities to claim back the basic rate of tax paid by the donor, increasing the donation by around a quarter. Difficulties can arise when it is not clear whether a sum paid to a charity is a donation or a payment for services.
If a payment is made by a member as a membership subscription then HM Revenue & Customs should treat the membership subscription as qualifying for Gift Aid purposes as long as it allows no personal use of the charity services or facilities. Membership subscriptions will continue to qualify for Gift Aid, even if members receive newsletters, or allow general access to the society’s activities.However, a membership subscription will not qualify for Gift Aid if part of the membership is in lieu of, for example, some tickets for a production that would normally be subject to an additional charge.
If a society charges a basic membership, but also separately charges for other activities and benefits, then the basic membership subscription will qualify for Gift Aid.Therefore if your society charges a basic membership subscription of £50.00, with an additional audition fee of £25.00 per production, then it is likely that only the basic membership subscription for £50.00 will qualify for Gift Aid.
A charitable society can give its members a small general benefit in order to acknowledge the gift but there are limits.If the membership subscription is less than £100.00, up to £25 of the donation can be classed as a benefit for the donor.If the member gains a benefit over and above this limit, then a membership subscription cannot be treated as a donation, and will not qualify for Gift Aid.
As well as the complex Gift Aid rules, the society will also need to make sure it is complying with VAT Regulations.If a member is given a benefit in return for a payment, then this could also be considered as a business supply for VAT purposes, and VAT may be due on that income.
The Society’s governing documents will set out a framework for membership, that will need to be followed (or changed) to allow for annual subscriptions. Any changes will need to be approved by the Charity Commission. The NODA legal helpline can help. Keith Arrowsmith, partner at JMW Solicitors and NODA legal helpline lawyer recommends that general membership and special additional fees are kept separate, and in any event, copies of evidence of the society’s activities are kept to help show HMRC how your society’s membership is structured.
Each member will need to complete a Gift Aid declaration. An example declaration can be found on HMRC’s website.
It may be worthwhile speaking to a specialist accountant before deciding on whether or not to claim tax back on Gift Aid donations.Although there is no separate registration process to make a claim for Gift Aid, the society must be recognised by HMRC as a charity for tax purposes.This is a separate process from registering the society with the Charity Commission as a charity.If you choose to go down this route, expect to have to justify any claim and therefore keep very careful records of all Gift Aid declarations in accordance with the Gift Aid schemes.
Cara Turtington, partner at accountancy firm Saffery Champness says:
“Many societies miss out on the benefits available to them by failing to structure their membership efficiently. There is an administrative burden in collecting and retaining the information required to operate the scheme but the benefits to the society can be significant.”
The HMRC runs a charities helpline and further details are available on their website at www.hmrc.gov.uk/charities.
15 February 2012
