HMRC updates guidance on gift aid regarding donor recognition (including naming rights) – Charities and non-profits

HMRC recently updated its guidance for charities on the Gift Aid scheme to clarify the rules under which acknowledging donor contributions, including naming buildings after a donor, results in the creation of a taxable benefit.

The recently updated guidelines make it clear that as long as acknowledgments are not advertisements for a business (or corporate sponsorship) and simply reflect the name of the individual donor, such acknowledgments will not be considered a benefit (see chapter 3, 3.19.1). The same applies to buildings, provided that the name of the building does not serve as advertising or sponsorship for a company, giving a building (or part of a building) the name of a donor does not will not be considered a potentially taxable benefit.

There were concerns that previous guidelines (updated in 2019) on applying Gift Aid to donor acknowledgments such as commemorative plaques or building names were ambiguous, and some advisers felt they could be interpreted as giving give rise to a taxable benefit for donors when a donor who had contributed substantially to the cost of the building then had the building bearing his name. This contrasted with the long-term approach taken by HMRC to date, whereby naming a building after a donor was not treated as a benefit. The Charitable tax group raised the issue with HMRC, resulting in updated guidance. The language in the guidelines which contributed to this ambiguity – stating that to avoid being considered a benefit under Gift Aid rules, the naming of a building (or part of a building) must be un solicited and not expected in return for the donation – has been withdrawn.

However, the updated guidance indicates that transactions in which separate advertising or sponsorship agreements are made regarding the naming of a building would be outside the scope of the Gift Aid program (3.19.8). Similarly, when a plaque names the individual donor and promotes a business, it will be considered advertising, and therefore a benefit.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.