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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I want to set up an online charitable fundraising platform.

Customer Question

I want to set up an online charitable fundraising platform. A host invites his/her guests to a birthday party. Instead of bringing a present, guests contribute money towards the host's party fund (typically £20 contribution by guest). After the event, the fund (say a total of £400 from 20 guests) is split into a ratio chosen by the Host (usually 50% / 50%). 50% is paid into the host's account for the purchase of a birthday gift. The other 50% is paid to a charity chosen by the host. Is there gift tax on the contribution made by the guest to the host fund? This is about a typical kids birthday party where tradition says - guests bring presents. In our case, they would make an online contribution instead of a present and the total will be shared between the child and the charity chosen by the child.

Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

I would submit that this would be a highly complex and possibly expensive way to achieve your ends. As far as UK taxation is concerned it would almost certainly be regarded as 'trading between members' and thus outside the scope of UK taxation which, in any event, does not include a gift tax regime.

Running a trust would involve the unnecessary complexities of appointing trustees and accounting for trust funds.

I am so sorry to have to rain on your parade.

Customer: replied 1 year ago.
Hi Keith, thank you for your opinion. Are you a qualified tax advisor?
I need to make the following clarifications. This online platform will be a limited liability company. The users will not be trust members. They will however sign the terms and conditions for using the site.
I don't understand the logic of your arguments:
- you say, this would fall outside of UK gift tax legislation
- then why is this an expensive way to achieve the objectives if no gift tax?
This is a money collection service. The question is when a guest goes to a birthday party and brings a gift, is this subject to gift tax. If not why?
If the guest goes to a birthday party and does not bring a gift but contributes money to the host for the purchase of a collective gift and donnation to a charity subsequently done by the host, is this subject to gift tax and why? Could you please refer to specific legislation, principles. Etc. what transactions are subject to Gift tax and does this fall or not under those regulations.
Many thanks for your reply. If you think I need to get some specialist tax advice, could you please give me some suggestions.
For your information, I am already providing this service in other countries and now would like to launch the UK.
Look forward to hearing back from you.
Regards,
Svetlana
Expert:  bigduckontax replied 1 year ago.

The UK does not have a gift tax regime. There is no gift tax in the UK so the problem does not arise.

What I suggested might be expensive would be setting up a trust, but as you do not intend to do this I will withdraw that comment, An UK company is cheap to set up and operate. A director of an UK company need not be e British National nor need they reside in the UK.

Customer: replied 1 year ago.

Hi Keith,

Thanks for your prompt reply. I now understand your comment.

Just one final clarification. Whilst there is no gift tax, there is inheritance tax in the UK. I read the govt website which says that certain gifts may be subject to inheritance tax but there is an exemption for gifts up to £250 per year, Christmas, birthday presents, etc.

What I dont understand is if that inheritance taxation is only applicable to a person's estate who dies or could the group contribution of cash towards a present by the guests to the host be construed as a gift for the purposes of the inheritance tax and subject to tax if over £250 / year? If so, who is liable to taxation, the guest or the host?

Is the money that a guests gives to a party host subject to any UK tax (inheritance or income tax)? If so who is liable to tax.

Many thanks and great service!

Svetlana

Expert:  bigduckontax replied 1 year ago.
UK Inheritance Tax (IHT) is at 40% on assets over 325K on death. Gifts made by a deceased person within the last 7 years can be added back to his estate. The deceased's estate is liable for IHT not the beneficiary save in the exceptional circumstances of a substantial lifetime gift where the estate is insufficient to meet the IHT on the add back. The 325K Limit is enhanced in any event by inter spousal and charitable bequests. I suggest it unlikely that your proposed Business would ever be affected.
Customer: replied 1 year ago.

Thank you. Could you please then confirm if the proposed transaction:

- A gift contribution of cash from a party guest to a host be subject to inheritance, income or other tax in the UK?

- Whether such a gift contribution in cash which exceeds £250 will be subject to inheritance or other tax in the UK in the hands of the guest.

Many thanks.


Svetlana

Expert:  bigduckontax replied 1 year ago.

It could in certain circumstances be added back to the donor's estate if made in the last seven years of life. Such gifts run off at a taper in any event over those 7 years.

The moneys given to the guest would be aggregated with all their other assets on decease and subject to IHT.

However, it is not your affair but the resoonsibility of the executors of administrators of the deceased.

Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 1 year ago.

Hi Keith,

Thanks very much for coming back. I wont exit before rating your service - thanks for bearing with me!

I'm just not sure if the last email answers my question:

If no one dies, is there UK tax on the cash given by a guest to a party host if that cash gift is more than £250?

I note that your previous answer refers to money given to the guest. It's the other way around, the guest gives money to the host. Did you mean the host's estate may be subject to IHT if they die.

Thanks for bearing with me and my clarifications. I need to be sure whether the transactions on my platform are subject to any UK tax (whether inheritance, gift or personal income tax).

Thanks.

Svetlana

Expert:  bigduckontax replied 1 year ago.

If no one dies the answer is no tax.

The money given to he host will be rolled into his assets if he hasn't already spent it in between on death for IHT purposes.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3356
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.

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