Proposed legislation risks undermining membership charities’ ability to claim gift aid

01 Dec 2023 News


A proposed government bill that is making its way through parliament could deprive membership charities of their current ability to claim gift aid on members’ subscriptions, sector experts have warned.

On 25 April, the House of Commons introduced the digital markets, competition and consumers bill, which seeks to “regulate and increase competition in digital markets”. 

If enacted, the bill would tackle “subscription traps by imposing new duties on traders” and “give new protections to consumers who make advance payments to consumer saving scheme contracts”. 

Charity professionals and experts have expressed concerns about the new rules around auto-renewing subscriptions, with NCVO saying that they would “contradict the gift aid requirement that there is no condition of repayment”.

Membership charities risk losing ‘millions’ in gift aid

Under the bill, consumers would benefit from an initial “cooling-off period” of 14 days to cancel subscription contracts if they changed their mind or did not like the product. 

Although it is unclear whether the new legislation would cover charity membership subscriptions, Shoosmiths said that “charitable membership contracts aren’t expressly listed as an ‘excluded contract’ within the bill”. 

The law firm wrote in a recent article: “Given that the 14-day statutory cancellation rights under the bill (and under existing consumer protection laws) automatically implies a condition of repayment, this would indicate that gift aid couldn’t be claimed on donations if they fall within the scope of the bill.

“This could, of course, have serious implications for charities which rely on memberships taken as a subscription.”

Robert Nieri, legal director at Shoosmiths, told Civil Society that there is “a large number” of big and small membership charities, particularly in the heritage and conservation sector, that claim gift aid on members’ subscriptions from HMRC under specific provisions.

“The gift aid losses could potentially run into many millions,” he said. 

CTG: Bill has potential for ‘unintended consequence’  

Richard Bray, chair of Charity Tax Group, said that the bill as it currently stands poses “a major issue for any membership organisation that claims gift aid”.  

“It’s an unintended consequence of a measure intended to provide consumer protection. For those charities affected it could have a major impact on their income at a time when they need that income most,” he said. 

“I have suggested to charities affected by this that they work out the impact for them which can then be used to support lobbying to amend the bill.  

“We’re also seeking clarification from HMRC of how they would treat this change as we’re sure that it would not be their intention to reduce the amount of gift aid that can be claimed by membership organisations.”

CFG: ‘Charities musn’t be negatively affected’

Richard Sagar, head of policy at Charity Finance Group, said that CFG is “working with charities and other infrastructure bodies to push for the bill’s amendment so that charities aren’t negatively affected”. 

He said: “The bill could be problematic as it will give individuals the right to cancel a subscription contract, without any penalty, during the initial cooling-off period and any renewal cooling-off period. The unintended consequence of this would mean that the subscription isn’t eligible for gift aid.

“To avoid this consequence, we would propose relevant charity membership subscriptions being listed as an excluded contract in the bill, and for there to be a corresponding change to the consumer contracts regulations.”

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