Charity membership subscriptions

In order to qualify for Gift Aid, the total value of all benefits received by the donor must fall within the following limits:

• donation/subscription of up to £100: 25% of the donation
• donation/subscription of more than £100: £25 plus 5% of the amount above £100 (up to a maximum of £2,500).

How benefits are valued for Gift Aid can be complex. The basic rule is that a benefit’s value derives from the public sale price of an identical or comparable item, but there are various other established methods for valuing specific types of benefit.

Some examples of types of benefits commonly found in charity membership packages include:

• discounts – Generally valued based on the average take-up of the discount across all members
• literature – Can be treated as having a nil value provided the literature primarily describes the work of the charity
• private events – Generally valued based on the marginal cost of the event and the number of people in attendance.

An annual right of admission to view charity property can be treated as having a nil value for Gift Aid purposes. This is particularly useful for museums, galleries and heritage sites that offer memberships.

This is a specific rule in legislation and charities should make themselves aware of the various conditions for this rule before implementing it into a membership. In particular, the right of admission can extend only to the donor and members of that person’s family. Admission rights that include the right to bring a non-family guest may affect Gift Aid eligibility unless structured appropriately.

It is possible for a donor to make a single payment which is split into two parts, one for purchasing benefits and the other as a donation. In this case, no benefits are received for the donation element of the payment and so this part should fall within the benefit limits for Gift Aid. This may be useful for charities that wish to market a “membership plus donation” option for their membership schemes.

Split payment treatment can only be applied where the benefits are available to be purchased separately. HMRC may expect to see evidence that donors are made clearly aware of the fact the benefits can be purchased separately. Charities that wish to promote a “membership plus donation” option should make sure it is clear to donors that they can purchase the same benefits without the optional donation. If the evidence suggests this is not clear to donors, that may jeopardise the eligibility for Gift Aid.

If someone pays a subscription to gain specific benefits of a membership, VAT must be calculated on the total amount of the subscription. However, it must be noted that the VAT liability on this subscription mainly depends on the liability of the benefits supplied. If there are multiple benefits being supplied, these could be treated as multiple supplies for VAT purposes.

If any of the elements of the membership package do not relate to the main purpose of joining the membership, this could potentially be treated as multiple supplies. In this case, as the separate elements may have different VAT liabilities, the subscription must be apportioned between the different elements. 

Some examples of what kind of benefits might make a subscription to membership fall under multiple supplies are listed below.

• priority booking rights
• guaranteed seats
• discounts on admission charges
• items with a resale value

Those examples of benefits are considered substantive on their own and would characterise a separate supply to the membership subscription.

In the case where there is one main reason and benefit to subscribe to a membership, there is a single supply taking place. For example, if someone joins a certain subscription to a trade union or a professional body, the main reason is obtaining the benefits of joining. Any additional elements (e.g. leaflets, stickers or newsletters) would be treated as incidental to the main supply (i.e. membership subscription).

Organisations which are non-profit making and supply a mix of zero rate, exempt and standard rate benefits, may apportion the subscriptions which would normally be characterised as single supply. This would enable different treatments i.e. a single supply could have its incidental costs treated as separate supplies and become multiple supplies.

The subscription of membership for non profit organisations are usually exempt when treated as a single supply but as a mixed supply various VAT liabilities apply.

When an entity can lower the level of exempt supplies it makes, especially if it can treat part of the supply as zero rated, it could benefit from a higher percentage of input VAT recovery. 

This mixed supply concession is not mandatory, but if treated as such, all benefits of membership need to be taken into account. This concession cannot be applied retrospectively.