HMRC updates Gift Aid guidance regarding acknowledgment of donors (including naming rights)

HMRC has recently updated its guidance for charities on the Gift Aid scheme to clarify the rules on whether acknowledging the contributions made by donors, in particular by naming buildings after a donor, results in a taxable benefit being created.

The newly updated guidance makes it clear that as long as acknowledgements are not advertisements for business (or business sponsorship) and simply reflect the name of the individual donor, such acknowledgments will not be considered to be a benefit (see chapter 3, 3.19.1). Similarly with buildings, provided the name of the building does not act as an advertisement or sponsorship for a business, then naming a building (or part of a building) after a donor will not be regarded as a potentially taxable benefit.

There were concerns that the previous guidance (updated in 2019) on the application of Gift Aid to donor acknowledgements such as commemorative plaques or building names was ambiguous, and some advisers felt that it could be interpreted as giving rise to a taxable donor benefit where a donor who had contributed substantially to the cost of the building then had the building named after them. This contrasted with the long-term approach taken by HMRC to date whereby the naming of a building after a donor was not treated as a benefit. The Charity Tax Group raised the issue with HMRC, resulting in the updated guidance. The wording in the guidance that contributed to this ambiguity – stating that in order to avoid being considered a benefit under the Gift Aid rules, the naming of a building (or part of a building) must be unsolicited and not expected in return for the donation – has been removed.

However, the updated guidance states that transactions where separate advertisement or sponsorship agreements are entered into relating to the naming of a building would be outside the scope of the Gift Aid scheme (3.19.8). Similarly, where a plaque names the individual donor and promotes a business it will be considered an advert, and therefore a benefit.

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