Wednesday, September 28, 2011

BLOG 113


HMRC have issued a guide on Gift Aid for School Charities. When I saw it I thought, “What a good idea!” When I read it I thought somewhat differently.

It really splits into two parts; a baby’s guide to Gift Aid and whether Gift Aid applies to common types of appeals for funds by schools. That made me wonder who it is aimed at. Surely a charity already knows about gift aid and does not need the baby guide. The people who might need it are parent groups that launch an appeal to raise funds to help their children’s school and do not know that if they form a charity – which is easy and cheap to do if they use the Charity Commission’s draft trust deed – they can use gift aid to increase the amount available to the school. Sadly it is not aimed at such people.

The second bit is useful to school charities – or, at least, would be if it were a lot less controversial than it appears to be. Suppose, for example, the school charity agrees with the school a “non-uniform day” under which pupils (or their parents) who make a donation do not have to wear school uniform on that day. The guide says that the payment will not qualify for gift aid. It is unclear, to me at least, why not. It may be fun for the child not to have to wear uniform for one single day during the school year, but I find it hard to categorise it as a benefit. I find it even harder to envisage that, even if I am wrong, it is a benefit that can be valued and has a value of more than 25% of the donation (or more than £25 if the donation exceeds £100).

I equally find it hard to believe that if a school charges low fees to attract a mix of social classes and asks parents to consider a voluntary donation to the school, and without the donations the school would make a loss, the donations are “school fees dressed up as donations”. They seem to me to be a way of saying to parents that if you value the school environment and can afford to do so, please consider a donation so that we can continue to attract pupils whose parents are less well off. Again if that is a benefit, I find it hard to see that it has any monetary value to the children (or parents) of those who make donations.

However this is apparently so wicked that “schools that enter into such unacceptable arrangements risk losing entitlement to all charity reliefs, not just Gift Aid”. To say that I am staggered at this is an understatement. However it is your taxes as much as mine that gift aid passes to charities, so perhaps you agree that social cohesion is a wicked concept (in the old meaning of “evil” rather than the new one of “desirable and up to date”).

And what about a “library club”. Suppose the charity says, “We want to fund a new school library; if you donate a minimum of £50 to the library fund your child can be a member of the library club that has access to the library”. “No”, say HMRC “that is not a charitable donation, it is a payment for services”. I find it hard to agree with that. I suppose that having a right to use a library could be construed as a service but I find it hard to categorise the donation as consideration for that right. It seems to me much more likely that the right is a subsidiary benefit from the donation. If so, I find it hard to value it at over £12.50 (the permissible benefit for a £50 donation) when the child can borrow the same books for free from his local authority library. Of course, in reality the child is more likely to use the school library, which is convenient, than the local authority library which is less convenient. It may be that being encouraged to expand one’s mind by reading is regarded by George Osborne as so valuable a benefit that it should be taxed. I wonder whether Michael Gove agrees!

Suppose a parent gives his child’s school £1,000 to buy computer equipment but says that when the school eventually wants to scrap it, he would like the opportunity to consider buying it back instead. We all know that £1,000 of computer equipment today won’t be worth £25 in ten years time when it has passed through the hands of 10 classes of school children. But HMRC say gift aid cannot be claimed if it is even suggested that donations could lead to the ownership of the equipment. They go on to say that “there should be systems in place to prevent non-educational use of this equipment”. What does this mean? That if teachers occasionally use school computers to access their personal e-mails, the donation of the fund to buy the computer is not a charitable gift? That if children use the school computer to go onto Facebook it is not a charitable gift? Surely encouraging school children to increase their computer literacy is educational.

I have ended up with a feeling that this “guidance” is not intended to be helpful; it is intended simply to save HMRC time by discouraging school charities from making valid claims that HMRC might challenge. It also gives the impression of having been written by a jealous and disgruntled parent who believes that, if his or her child does not go to a school where parents are encouraged to help the children of those less fortunate, it is unreasonable for the government to allow any tax relief at all to such schools, so it is up to HMRC to correct this by administratively cutting down the scope of gift aid.



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