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HMRC internal manual

VAT Charities

Business and non-business: Charitable activities: When is a donation not a donation?

If there is a direct link between the payment and a benefit received by the giver the monies cannot be treated as a donation. As long as it is clear that a person is under no obligation to make a payment in order to receive certain benefits then the payment is usually a donation. However the giving of a token as an acknowledgement of the donation is not treated as a supply for a consideration, for example:

On Poppy Day you will not usually be given a poppy unless you make a donation. However we do not regard the donation as consideration for the supply of a poppy. Low value tokens of this sort can be regarded simply as an acknowledgment of the donation, provided that no minimum payment is specified. By way of contrast, Comic Relief will sell red noses to members of the public. A price is specified in order to obtain a red nose. In these circumstances the price is consideration for the supply of goods. Purchasers may choose to give in excess of the sum specified, in which case the excess can be treated as a donation and outside the scope of VAT.