Gift Aid Services

Restricted funds or conduit giving:

• HMRC has been looking carefully into the nature of some of the donations made to charities for restricted purposes. If they take the view that the charity is merely the agent or conduit in passing the funds across to the ultimate recipient they may take the view that such donations are not eligible to be Gift Aided because the trustees of the charity have no ownership over the funds.
  
  Restricted funds are those which belong to the charity. Conduit funds are donations which are merely passing through the charity to their intended recipient.
  
  This is a hazardous area for charity trustees; if they get it wrong there could be significant financial consequences for the charity trustees and the beneficiaries. The boundaries between trustees acting as principals and agents is not always clear cut. In the event of any uncertainty advice should be sought.

• Here is an example:
  A church member gives the treasurer £100 with the stipulation that it is sent to a foundation in India (which operates within the church’s governing document). The church has not supported this foundation in the past and has not appealed for funds for it. There is a possibility that this could be regarded as conduit funding. The documentation accompanying this donation will be all important. If the trustees receive the money, and learn about the foundation before making the gift, the risk is reduced. It is recommended that before the gift is accepted, the trustees are requested to consider whether they are willing to support this venture by setting up a restricted fund and inviting donations. This gives them control; also a degree of responsibility to make sure that the funds are properly expended.
  
  Stewardship Services produced an excellent briefing paper on this subject which will repay further study. It’s called ‘When a charity’s income is not its income!’ dated September 2006.