If you are a charity or other not-for profit organisation and you operate a ‘patron’ or ‘supporter scheme which gives benefits in return for regular or fixed contributions.
A recent First-Tier Tribunal case (The Serpentine Trust) offers a stark reminder of the importance of setting up such schemes correctly in order to achieve the desired VAT consequences. Any fixed contributions are fully VATable and only any additional ‘freely-given’ payments can be treated as donations.
Unfortunately, the Serpentine Trust got into dispute with HMRC because their supporter schemes did not allow the supporter to obtain the benefits for payment of a minimum fixed price – with any additional payments being freely-given (and therefore able to be regarded as donations outside the scope of VAT). In contrast, the supporter was required to pay the full amount for any particular scheme before they could obtain any of the benefits.
The Tribunal held that, in such circumstances, the full amount paid by the supporter was liable to VAT at the standard rate.
If you offer such schemes to patrons or supporters we strongly recommend you review the terms and conditions to ensure that VAT is being calculated on the correct values.