Gift Aid Manipulation

Gift Aid Manipulation

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A singer and a church jointly approach a charitable foundation for funds so that the church can pay the singer to perform at services. The foundation makes a grant of £3000 and this is paid to the singer, who then immediately gifts it to the church. The church reclaims an additional £750 of tax relief under the Gift Aid scheme. The singer will be paid fees per service in the future until the £3000 runs out.

This proposed arrangement strikes me as manipulative and immoral. Do others share my view?

Replies (11)

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By johngroganjga
24th Mar 2014 11:16

If the payment to the singer is conditional on him making an immediate gift of the same amount then I agree with your analysis.  But does he declare the grant as taxable income?

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By Phelan
24th Mar 2014 11:22

Manipulative yes. Immoral would depend on the works of the church in its local community and if they are strapped for cash whilst aiming to help those they support.

 

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the sea otter
By memyself-eye
24th Mar 2014 11:56

it's not a gift though

from the singer to the church that is: as the singer expects to get something out of it (a contract to sing).

Additionally, what do the churches own rules say about handing over grants received to individuals?   

 

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Replying to lionofludesch:
By bro0010
24th Mar 2014 12:30

it's not a gift though

memyself-eye wrote:

the singer expects to get something out of it (a contract to sing).

I agree completely. No Gift Aid ought to have been claimed.

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By bro0010
24th Mar 2014 12:25

Yes, on both counts

There's a very strong smell of rodent here.

It is hard to imagine scenarios where this could play out as above board. It is very strange that, if the foundation is to give a grant so that a singer can be paid by the church, the singer is given the grant directly. Why wouldn't the church be given the grant? Even stranger that the church authorities, without any prior arrangement with the singer, would then choose to pay the singer (whom they know has already been paid by the foundation) rather than apply the donation received at their own discretion within the bounds of the purposes for which the donation by the singer was given (and, remember, that can't be for anything that will personally benefit the singer). 

Shame on them.

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By Justin Bryant
24th Mar 2014 14:15

HMRC guidance

‘ Gift Aid only applies to unfettered gifts to a charity for its charitable purposes.’

 http://www.hmrc.gov.uk/charities/guidance-notes/chapter3/sectiond.htm 

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By Paul Hawes
24th Mar 2014 14:26

Sneaky

The church cannot reclaim the gift aid if the money is granted to them from the charity as it has to be provided by an individual which is why the singer had to donate it. It seems a very underhand way of making an extra £750 but it's hard to say that it's necessarily immoral.

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By Democratus
24th Mar 2014 15:41

If the approach was joint...

then this must have been the plan all the time.

There are a range of views as expressed above but the main questions are:

What was the intention of the foundation when they made the donation to the singer?

Has the singer, by receiving the donation managed to avoid this being seen as income and hence taxable?

Has the church correctly applied its own rules in this regard?

What is the contractual position regarding the church's "agreement" to use the singer until the funds are exhausted?

If asked for an opinion (without putting on my accountancy head) i am in two minds. I am always in favour of getting as much back from the tax man as possible, but i would expect a higher level of probity and honesty from an organisation which purports to represent the moral high ground.

It does stink though i don't really know why.

 

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By sijolees
25th Mar 2014 15:49

Thanks to everyone who posted. We have put these concerns to the church and they now accept that the Gift Aid route is inappropriate.

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By mhtax
25th Mar 2014 19:53

Singers position

I would say there was an argument that it was a gift which counted for gift aid as there could not have been an enforceable contract - however the scenario would be

grant from foundation to singer for singing - earnings - whether employed or self employed and taxable upon receipt.

gift from taxed income to church

payments received from church to sing - also taxable upon receipt

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By bro0010
26th Mar 2014 07:56

HMRC Audit

The last time our church had an HMRC audit the auditor asked for, inter alia:

a sorted list of donorsa sorted list of supplier names

I wonder what use he made of them? 

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