Cycling UK Forum

swansonj wrote:Could someone who is an expert in tax please confirm if this is true or not? I have never heard before of the option of the individual making a donation reclaiming the basic rate tax. I thought the system was that the charity (and only the charity) could reclaim the basic rate taz and the individual could reclaim any higher rate tax. I thought subsricptions were only tax deductible if to a professional organisation necessary for your trade.

I hate to admit this in public but I was an Inspector of Taxes. In answer to several points I see discussed in the forum, this is how Gift Aid works
First you must pay UK tax.

Second is the gain to the CTC.
Gift Aid donations, i.e. subscriptions if we become a unified charity, are regarded as having basic rate tax deducted by the member. The CTC would take your donation - which is money you've already paid tax on - and reclaim the basic rate tax from HM Revenue & Customs on its 'gross' equivalent - the amount before basic rate tax was deducted.
Basic rate tax is 20 per cent, so this means that if your full CTC subscription is, say £36, then using Gift Aid, it’s worth £45 to the CTC, so we get an additional £9 for every member paying a full sub of £36.

Third is the gain to a higher rate taxpayer personally, (and is separate and additional to the gain to the CTC described above).
If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 and/or 50 per cent and the basic rate of tax 20 per cent on the total 'gross' value of your subscription to the CTC.
For example, if your subscription is £36, the total value of your subscription to the CTC is £45 - so you personally can claim back:
• £9 - if you pay tax at 40 per cent (£45 × 20%)
• £13.50 - if you pay tax at 50 per cent (£45 × 20%) plus (£45 × 10%)
You can make this claim on your Self Assessment tax return.

Hope this helps.
Regards
Barry Flood
CTC Councillor

Jonty wrote:Jonty wrote:
I'm confused because I'm receiving contrary opinions on this matter.
Surely whether or not the CTC is restricted to only allocating 25% of members contributions towards member benefits if it were to become a charity, and whether or not it could increase the amount of money spent on member benefits to 125% of total member contributions if it were to become a charity, are matters of FACT not OPINION.

Firstly may I say that all of the information given either here or in the CTC website is based on specialist tax advice taken by Council. That advice indicates that any non qualifying member benefits will fall easily within the 25% allowable, (the magazine for example will not be counted a member benefit), thus leaving the whole of the member subscription qualifying for Gift Aid. But....even if the 25% limit is exceeded we could still qualify for Gift Aid on the vast majority of the membership subscription, which would bring massive extra funding to the club.

This is a complex area, but one where all the professionals involved anticipate a favourable outcome. If you would like to go into further detail here is a link to the matter on our website, http://www.ctc.org.uk/DesktopDefault.aspx?TabID=5364. Alternatively I invite you, or anyone else with specific points to contact me direct at Barry.Flood@CTC.org.uk

Jonty wrote:Now there's a 'Good Idea' (as long as members get an unedited report from the independant expert)

An answer to this point was posted yesterday by our Financial Advisor;
"The report on the tax position was originally commissioned for the use of Council, and thus contained one section relating to engagement with the Inland Revenue to optimise the outcome for the CTC. As I'm sure you can imagine, publishing that section might be counterproductive in such discussions, so it was redacted from the publicly available copy. No conspiracy theory, no smoking gun, and indeed for that matter nothing to do with the current club / charity vote either.

For the purposes of transparency, I think it was originally me who noted the section had been included in the report circulated to Council and therefore suggested it be removed.

Simon Connell
Financial Advisor to Council"

The independent experts Sayers Vincent tax report is available on the CTC website.

Regards

Barry Flood CTC Councillor (and ex HM Inspector of Taxes)

Dear Simon

Simon L6 wrote:Barry - any chance of the unedited version of the professional advice being posted on this forum?

May I remind you that an answer to this same point was sent to you just yesterday by our Financial Advisor. I append it to assist your memory;
"The report on the tax position was originally commissioned for the use of Council, and thus contained one section relating to engagement with the Inland Revenue to optimise the outcome for the CTC. As I'm sure you can imagine, publishing that section might be counterproductive in such discussions, so it was redacted from the publicly available copy. No conspiracy theory, no smoking gun, and indeed for that matter nothing to do with the current club / charity vote either.
For the purposes of transparency, I think it was originally me who noted the section had been included in the report circulated to Council and therefore suggested it be removed.
Simon Connell
Financial Advisor to Council"

Simon L6 wrote:And has any further consideration been given to twin-tracking the subs to allow gift aid to be reclaimed by the Trust and allow the Club to remain independent?

On this point, Council considered it already and was advised that this will not work for purely practical reasons. Effectively it would mean that the donation qualifying for Gift Aid to the Trust, say £19, would become a totally voluntary additional payment. Members would get all the membership benefits for which they currently pay £37 for merely £18 paid to the Club. There would be absolutely no incentive for them to make the balance of £19 as a voluntary payment. Hardly good financial management, but I would be interested to have you spell out in precise terms how to make this work without a large loss to the organisation's basic income.

Your third point is irrelevant to the matter currently before our members.

Regards

Barry Flood
CTC Councillor

lobsterboyuk

Thanks for your question

Firstly may I say that all of the information given either here or in the CTC website is based on specialist advice taken by Council. That advice indicates that any non qualifying member benefits will fall easily within the 25% allowable, (the magazine for example will not be counted a member benefit), thus leaving the whole of the membership subscription qualifying for Gift Aid. But....even if the 25% limit were to be exceeded we could still qualify for Gift Aid on the sizeable balance of the membership subscription, which would bring massive extra funding each year to the club.

This is a complex area, but one where all the professionals involved anticipate a favourable outcome. If you would like to go into further detail here is a link to the matter on our website, http://www.ctc.org.uk/DesktopDefault.aspx?TabID=5364. Alternatively I invite you, or anyone else with specific points to contact me direct at Barry.Flood@CTC.org.uk

So the answer to your question is "Yes"...the CTC will continue providing all of the benefits you mention to Members, but with more money to spend on the services that members value.


Regards

Barry Flood
CTC Councillor

Regulator

Greg

Judging from the number of contributors to this forum who have picked up the identical wrong impression from the Save the CTC website that the 25% rule somehow restricts the amount of their subscriptions that can be spent on them as members, I think that the wording, put there either deliberately to advance a particular viewpoint, or simply inadvertently, needs to be changed at once so it causes no more misunderstandings on this topic.
I’m sure you would agree that truth and precision are essential in what we show to our members.
Regards
Barry

May I attempt a little clarification about the "25%" issue?

The references are presumably to the Save the CTC web site where there is an extraordinary section about the “25% rule”. The 25% referred to is a calculation of how much Gift Aid we can claim on your membership fee. This is solely a tax rule which calculates how much of the membership fee is personal benefit and how much tax relief we can claim.
As most of your fee helps you and others go cycling (an allowable charitable activity) and individual items like the magazine are excluded under the rules this should not affect CTC materially.
However Save the CTC goes on to make the erroneous claim that “This means that only £9 of the current £36 adult member fee – or even less if you pay a lower fee – could be spent on you.”
No it doesn’t. This shows a fundamental misunderstanding of tax law as it affects charities. There is no value set on benefits in Charity Law; this is purely a tax calculation, and therefore imposes no limit on the amount of their subscriptions that can be spent on members.
I might add that I was a tax professional.

Barry Flood
CTC Councillor

lobsterboyuk

lobsterboyuk wrote:with respect to the points made on the "Save the CTC" website - such as only 25% of membership fees for membership benefits?

You are referring presumably to the Save the CTC web site where there is an extraordinary section about the “25% rule”. The 25% referred to is a calculation of how much Gift Aid we can claim on your membership fee. This is solely a tax rule which calculates how much of the membership fee is personal benefit and how much tax relief we can claim.
As most of your fee helps you and others go cycling (an allowable charitable activity) and individual items like the magazine are excluded under the rules this will not affect CTC materially.
However Save the CTC goes on to make the erronoeus claim that “This means that only £9 of the current £36 adult member fee – or even less if you pay a lower fee – could be spent on you.”
No it doesn’t. This shows a fundamental misunderstanding of tax law as it affects charities. There is no value set on benefits in Charity Law; this is purely a tax calculation, and therefore imposes no limit on the amount of their subscriptions that can be spent on members. I might add that I am a tax professional.

lobsterboyuk wrote:'m not at all comfortable with the idea that rather than joining a club of like-minded folk I would mainly be donating to a campaigning organisation.

On your second point may I invite you to read the last paragraph of my interview at page 8 of the current Cycle;
“With the new Act the government recognised that healthy, environmentally friendly cycling is good for our country, and offer us up to £160,000 in tax relief to help our work, additional assistance that “no” voters would have us reject. I emphasise that these will be our funds, to be spent directly by us, on traditional member benefits like local member groups, and additional financial support for local and national events.”
Campaigning is a core part of CTC supported by those voting both for and against our charity motion. Long before this charity debate CTC members were proud to have spent over 100 years campaigning to make the roads safer for cyclist.

I hope this helps.

Barry Flood
CTC councillor