Charity and other non-profit making organisations that operate patron or supporter schemes will be interested in the recent VAT decision of the First-Tier Tribunal in The Serpentine Trust Ltd.
Patron schemes are popular with charities as a method to secure donations. Typically, they offer supporters a wide variety of benefits in return for a minimum payment, where the amount exceeding the minimum payment is treated as a donation. This treatment is generally accepted by HMRC.
The Serpentine Trust ran a number of supporter schemes, each offering an array of benefits ranging from priority booking rights to free invitations to private viewings at its art galleries. The level of benefits received varied between schemes; however, in order to receive any of the benefits, the wording of the documentation meant that the supporter had to pay the full amount of the particular scheme. A supporter could not obtain the benefits by paying a minimum price.
The Trust contended that the benefits had little or no value to the supporter, and were given to supporters as an acknowledgement of their donation. As such, it did not account for VAT on the amounts it received from supporters.
The Tribunal agreed with HMRC and decided that the payments received were payments for a standard-rated supply of the benefits to the supporters. In its decision the tribunal also said that:
- as the Trust did not offer the benefits for a minimum payment, it could not itself apportion an amount of the receipt to the value of the benefits (standardrated) and treat the 'excess' as a donation (outside the scope),
- although the benefits in each of the schemes comprised a number of supplies subject to different rates of VAT, the package of benefits in each scheme was a single supply, subject to the standard rate of VAT.
This is a reminder of the steps that should be taken when offering a supporter scheme if it is the intention that part of the receipt should be treated as a donation. HMRC's guidance makes it clear that it is only where the supporter is aware that the benefits of a supporter scheme can be obtained in return for a given amount that the excess over the minimum payment can be treated as a voluntary donation not subject to VAT. If you operate patron or supporter schemes and would like to discuss the implications of this decision in more detail, please contact a member of the VAT team.
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