Digital Markets, Competition and Consumers Bill: Consumer Rights v the Gift Aid Regime

What matters

What matters next

The recent Autumn Statement contained little support for charities as the sector continues to face increased demand, higher costs and reduced funding.

This means charities need to maximise whatever funding they have - but continuing uncertainty about whether the Digital Markets, Competition and Consumers Bill (‘Bill’) rapidly making its way through Parliament will have unintended detrimental consequences for small and large membership subscription charities is causing considerable concern.

New Subscription Laws 

What are the new subscription laws?

The Bill seeks to tackle subscription traps by imposing new duties on traders who fall within scope and providing consumers with additional rights. Consumers will benefit from an initial and renewal 14-day right to cancel, allowing consumers to cancel subscription contracts and receive refunds, however they have entered that subscription contract (e.g. online, on premises, etc). 

Will the new laws apply to charitable membership subscription contracts?

In short, it is still not clear. Charitable membership contracts are not expressly listed as an ‘excluded contract’ within the Bill. This means we have to look to the definitions used in the Bill to see whether charitable memberships fall within scope of the subscription contract requirements. Unfortunately, the definitions provided in the Bill do not lend themselves neatly to charitable activities which means it is difficult to conclude with certainty whether the Bill applies.  

The Gift Aid Regime 

Charitable organisations benefit from Gift Aid on certain types of donation, which can include donations which are paid in order to become a member of a charity and receive certain benefits permitted by law. 

There is however a statutory requirement under Gift Aid for payments to be ‘gifts’, meaning that Gift Aid cannot be claimed on any amount which is subject to a condition of repayment i.e. which could be subject to a requirement to provide a refund. 

The Concern

Gift Aid is crucial for many charities, boosting donations by individual taxpayers by 25p for every pound donated. 

Given that the 14-day statutory cancellation rights under the Bill (and under existing consumer protection laws) automatically implies a condition of repayment, this would indicate that Gift Aid could not be claimed on donations if they fall within the scope of the Bill. This could, of course, have serious implications for charities which rely on memberships taken as a subscription.

What Next? 

Earlier this year the government opened a consultation on charities tax compliance and pledged to work with the sector on reforming gift aid and stated that any changes brought in due to the consultation will “not detract from the overall generosity of the reliefs or be intended to catch out legitimate charities”. 

However, as things stand, following the Third Reading of the Bill in the House of Commons last week, the legislation is still not clear about how it will impact on charities and align with the government pledge as set out above. 

Surely there is an opportunity here for joined-up government to put the matter beyond doubt by listing relevant charity membership subscriptions as an excluded contract in Schedule 20 to the Bill?

We are working closely with the Head of Policy at the Charity Finance Group to ensure this is the case and will update you on any progress made.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024.

 

Insights

Read the latest articles and commentary from Shoosmiths or you can explore our full insights library.