3.38.1 Some charities organise adventure challenge events, frequently overseas treks and bike rides, (events) to raise funds. For example, cycling in Cuba, rafting the Grand Canyon or trekking in China. The same principles apply to similar events in the UK (for example, parachute jumps, helicopter flights). 3.38.2 Participants are asked to pay a non-refundable deposit or registration fee (say, £200) and to raise sponsorship of a minimum set amount (say, £2,500) in return for going on the event. 3.38.3 The charity pays a third party to arrange the event (say, £1,200). The payment covers all a participant’s costs, (travel, insurance, provision of specialist equipment (bike, raft), food, accommodation). Gift Aid 3.38.4 Sponsorship payments are eligible for the Gift Aid Scheme provided all the normal requirements of the scheme are satisfied, including the benefit rules. The relationship of the sponsor to the participant — whether they are ‘connected’ persons — generally decides whether sponsorship may be Gift Aided. A ‘connected person’ is a person that is connected with a donor if that person is:
the wife, husband or civil partner
a relative (brother, sister, ancestor (for example, mother) or lineal descendant (for example, grandson)
the wife, husband or civil partner of a relative
a company under the control of the donor, or under control of connected persons
3.38.5 In most instances a participant will receives a benefit equal to the cost of the event, less any payment they personally make towards the cost of the event (including any deposit or registration fee payable). Where the value of the benefit exceeds the permitted levels Gift Aid will not be available. Sponsors who are connected persons 3.38.6 Sponsorship payments made by persons connected to the participant also, usually, fail the donor benefit rules (where the participant receives a benefit) and so will not qualify for Gift Aid but read paragraph 3.38.9. Sponsors who are not connected persons 3.38.7 Sponsorship payments made by persons not connected to the participant can be made under Gift Aid. So, if all the sponsorship raised by a participant is donated by persons not connected to the participant then all of those individual payments can be Gift Aided. Participant 3.38.8 Any deposit or registration fee paid by a participant will not be a donation to the charity and so cannot be a Gift Aid payment. Any donation made by the participant may also fail the benefit rules and cannot be Gift Aided. The participant pays the full cost of the event. 3.38.9 If a participant personally pays the charity the full advertised cost of the event from his own resources, the value of the benefit of participating is reduced to nil. The benefit rules still apply but in this instance the value of the benefit will be nil. So, while the sum paid by the participant to meet the full cost of taking part in the event cannot be Gift Aided, the donations made by others (both connected and not connected persons) can be Gift Aided. 3.38.10 In the example above the benefit, which would arise is the full cost of the trip as advertised by the charity — £1,200 (that is, £200 deposit or registration fee plus £1,000 for the balance of the trip). If the participant pays the charity £1,200 they will reduce that benefit to nil. None of this payment will be a gift to the charity so none of the £1,200 can be a Gift Aid payment. 3.38.11 If the participant reduces the benefit to nil by paying the full cost of the trip then all sponsorship paid, whether by connected persons or otherwise, can be Gift Aided. 3.38.12 Charities should take all reasonable steps to make sure that Gift Aid payments are not received from persons connected to a participant. HMRC recognises that, in practice, a charity cannot be expected to check whether a participant and their sponsors are connected persons. However, a participating charity must include in the event literature and on the sponsorship form:
an explanation that sponsors connected to a participant cannot make their donations by Gift Aid unless exceptionally the participant pays the full advertised cost of the event
the definition of a ‘connected person’ (read paragraph 3.36)