Media space as a gift in kind

[quote]Hi, Sarah

I'd be interested in knowing who did the talking, and who the "relevant people" were. I know that many accountants take a more negative view of such situations than HMRC.

I guess the argument is going to revolve around whether they have already had the tax benefit - they haven't made a profit on that page, so there isn't any tax to pay on it.

The company should probably speak directly to HMRC for guidance (assuming the benefit would be worth the trouble), with a receipt from you for "Goods/services to the value of...", rather than asking a tax "expert" (apologies to any such experts on the forum!) I have done this several times on VAT issues over the years - guidance from the Tax Man is the ultimate authority, even if another tax man disagrees!

Cheers

Gerry[/quote]

Hi Gerry,

It was HMRC that I spoke to about this and was advised that there is not tax benefit from this donation. I was just slightly confused as to why, but I think that it does come down to the fact that they have already had the benefit.

Thanks
Sarah

[quote]Hi, Sarah: I'd be interested in knowing who did the talking, and who the "relevant people" were. I know that many accountants take a more negative view of such situations than HMRC.

I guess the argument is going to revolve around whether they have already had the tax benefit - they haven't made a profit on that page, so there isn't any tax to pay on it.

The company should probably speak directly to HMRC for guidance (assuming the benefit would be worth the trouble), with a receipt from you for "Goods/services to the value of...", rather than asking a tax "expert" (apologies to any such experts on the forum!) I have done this several times on VAT issues over the years - guidance from the Tax Man is the ultimate authority, even if another tax man disagrees!

Cheers: Gerry[/quote]
Gerry: You make good points, as always. I may be somewhat off the topic, and by no means am I suggesting that Sarah give up her quest for the media space valuation from the donor company’s perspective. I’m simply reporting that, far too often in my dealings with non-profits’ handling of in-kind contributions, there was no reason whatever for their fixation on how the company-donor handled the valuation of the donation internally at the company---especially for the non-profit to be driven to only search for, and then to recognize, what was thought to be the actual cost to the donor of the in-kind gift.

In any event, inevitably, the search for such information was usually in vain. Should a paint manufacturer donate, say, 250 gallons of paint to a non-profit organization for its extensive internal renovation project, who cares what the actual manufacturing cost of the paint was to the company?

Could it be ten, or three, or how many, dollars per gallon? Maybe the paint, though perfectly good, was just past its maximum shelf life time and was written off by the company in an amount as a loss. In this real life instance, none of the cost-to-the-company machinations were of any use or interest to the non-profit I represented. An original line item in the renovation expense budget had the 250 gallons of paint listed as a cost to be met as estimated at about $3,000---what we expected to pay “retail.” Getting the paint at whatever actual cost to the paint manufacturer mattered not at all to us. Simply put, it saved us from needing to raise another $3,000 of donations to pay for the paint. That’s all that mattered.

In our acknowledgment, we did not---could not---certify any value for the company to use in its internal reckoning, be it for tax purposes or business expense. But, we did tell the company how much the paint meant to us when we did not not need to pay $3,000 “retail” for it, thanks to them.

Further, and finally, in any of our public recognition of any gifts, including in-kind, in this case, the paint company was listed in our donation recognition category at the $3,000 level---again, though a “paper credit,” nonetheless, it gratefully acknowledged what we would otherwise have had to pay “retail.”

There were three key individuals from within the organization who fought me on this. In a rather haughty fashion, they looked down at the gift, dismissing the value as next to mere nothing, “... considering what must obviously be a very low actual manufacturing cost, and we should recognize the paint donation in that way.” Such a cavalier, potentially insulting, attitude---thankfully did not prevail. Why should it have prevailed? Those same three Board members did not need to be concerned about their responsibility to raise the additional $3,000 in cash to pay for the paint, were it not for the in-kind donation, whatever the cost to the donor.

Hi, Sarah

I'd be interested in knowing who did the talking, and who the "relevant people" were. I know that many accountants take a more negative view of such situations than HMRC.

I guess the argument is going to revolve around whether they have already had the tax benefit - they haven't made a profit on that page, so there isn't any tax to pay on it.

The company should probably speak directly to HMRC for guidance (assuming the benefit would be worth the trouble), with a receipt from you for "Goods/services to the value of...", rather than asking a tax "expert" (apologies to any such experts on the forum!) I have done this several times on VAT issues over the years - guidance from the Tax Man is the ultimate authority, even if another tax man disagrees!

Cheers

Gerry

Hi Tony,

Many thanks for your response.

I agree that the tax issues with the donation are the company’s responsibility rather than the charity. We shall certainly thank and acknowledge their donation. The reason that I am interested in finding out exactly what the tax situation is, is because it adds incentive for both this and other media companies to donate space, rather than dropping rates to commercial clients to fill available space.

What may have been misleading in my post, was the reference to speaking to the ‘relevant people’. I actually meant tax officials, rather than anyone within my organisation.

From my understanding, gifts in kind that have a clear value can be deducted from pre tax profits. (See the gifts in kind section of link) [url]http://www.financehub.org.uk/managing_money_and_resources/taxation/tax_effective_giving.aspa[/url]

There is a monetary value associated with media space, through the ‘rate card’ value, which is what we would pay for the space if we bought it. However, as this cost is slightly negotiable it is difficult to establish it as a fixed cost (in the same way that you would negotiate on a car). That said, in donating us the space, the company have incurred the costs of printing the page to run our advert on. This price of printing can be established and I am a tiny bit confused as to why they would not be able to count this as a gift in kind for tax purposes.

Apparently they are unable to and I am really just wondering if anyone else has had similar experience? We were only donated a few pages, but I know that some large charities deal with a lot of donated space and I am intrigued to know the outcome!

Sarah: To my way of thinking, and to solidly support your impression, the receipt by non-profit organizations of donated products, time, and services are “in-kind gifts.” And that would most surely be the case with your media space example. How you good folks in the UK recognize and account for such in-kind gifts, is something I would like to know. However, I would wager that the US and UK ways are quite similar.

From what you said, I am reading between the lines that your question has more to do with your uncertainty about how your organization would recognize and credit the in-kind gift of media space. Your focus on how the donor could declare or deduct such a contribution led me to that assumption.

I respectfully suggest that you need not, should not, be concerned about how the donor accounts for what the company gave to you. From my experience, it matters not in the slightest how, if, or at all, the in-kind donors account for the value of their in-kind donation personally, or internally in their companies---each doing so in their own way, with the taxing authorities.

By US law, non-profit organizations cannot provide a donor with the dollar value of an in-kind gift. If they did, such declarations would have no meaning or acceptance with the taxing officials. Such valuations, when applicable, relative to the “fair market value” of in-kind gifts, need to be professionally assessed and certified elsewhere---if they can be---and that is the responsibility of the donor. This certification subsequently needs to be resolved with the professionals and others who prepare the donor’s tax forms---whose work in turn will need to be reconciled with government regulations. This should be of no concern at all to the recipients of in-kind gifts.

Therefore, if I am not off target regarding your situation, and how the UK sees it---when I have no interest regarding the cost incurred by the media donor, if any, and how the donor handles such accounting---we can get on to the most important aspect of the observation of the gift’s worth to us, as the recipient of the in-kind gift. And that, to me, is simply how your organization itself recognizes the gift of media space. To repeat, I submit that you should have no concern whatever about how the company handles the media space in-kind gift valuation.

What I have done over many years with every donation of in-kind gifts, was to acknowledge and publicly recognize such gifts with descriptions of their practical value to our organization, and make a direct reference and credit to the in-kind gift’s worth in dollars---what we might have had to pay “retail.” If you can come up with the cost you would have had to pay for the media space, then that is the value I suggest that you publicly ascribe to the gift in your donor listings, etc., even to thank the donor for “saving you from spending that money,” while not, at the same time, giving any official declaration to them for any possibly misleading tax or business expense declaration.

This topic comes up a great deal here in the US, and I have responded to the questions with a posting on my website:

--- In-Kind Gifts: How to Acknowledge and Recognize Them
[url]http://www.raise-funds.com/030508apotpourri.html[/url]

If I am off the mark, please accept an advance apology. But, I do hope that I have helped.

Cheers,
Tony