Ringing and Money
9. A 50% Return
One of a series of articles on Ringing and Money by Steve Coleman
We’re going to have major work done to our bell frame, and having read your article about Tower Funds, we’re going to transfer all of ours – about £2,000 – to the PCC. So how do we do it?
Splendid! I thoroughly approve. What’s more, if you take care to do it properly, the £2,000 you have at the moment will turn miraculously into £3,000 of bell frame spending power – or maybe even more. And credit crunch or no, a 50% return for just getting the paperwork right, must surely be a good thing.
So you’ve told me that you have a genuine Tower Fund. That is to say it’s a fund that’s in the control of the ringers and separate from the PCC accounts. It’s been built up through the band forgoing wedding fees, making individual donations, engaging in special fund raising activities, etc.
Such a fund is in law the fund of an Unincorporated Association. If your band has a written constitution, elects its new members and has a rule for the lapsing of retiring members, then the current members of the band are a matter of record.
But if, like most bands, you have no written constitution, you can still work out – with a little thought – who the current members are. It could be those ringers listed in the Annual Report; it could be those ringers who turn up regularly on Sundays; it could include learners who have been with you a fair length of time but perhaps not the very new learners. You just have to work it out.
The Formal Decision
And you need to work it out because the band members – being the members of your unincorporated association – need to make a formal decision. I know you’ve all already made an informal decision, but you need to make one formally before you can go ahead. So arrange a meeting – probably at the beginning or end of a practice night – and give all the band members a formal notice that it’s going to take place.
Of course, the meeting need only take a few minutes. But all the same, make a proper record of it, detailing all the people present, the motion proposed, the names of the proposer and seconder, and the result of the vote. Then put that record somewhere safe just in case you should ever need it – which you most probably never will.
Don’t, though, have the vicar present, or anyone else in a PCC capacity either.
Many church groups have an extraordinary compulsion to have the vicar chair any formal meeting. But the arrangement we’re talking about here only works because your tower fund is entirely separate from the PCC. Don’t cloud the issue by having a cleric around.
What You are Aiming for
So what is the motion you’re going to vote on?
Well, let’s step back a moment. Your aim is that the Tower Fund becomes £2,000 poorer and the restricted bell fund in the PCC accounts becomes at least £2,000 richer. But that doesn’t mean you need to give the £2,000 direct to the PCC.
You could, of course, but there’s a better way. And to see what that is, we need to recap on two essential points. First, a donation of money to a registered charity qualifies as a gift under Gift Aid if it is freely given by a taxpayer. We looked at this in detail in Ringing and Money 2 and Ringing and Money 3.
But it doesn’t matter where the payer thinks of the money as having come from, as long as he could decide not to make the gift if he didn’t want to.
And I’ve put that sentence in bold type because it’s fundamentally important to the Gift Aid system yet it’s something that many people get very confused about.
So for example, I’m Ringing Master of the Gloucester & Bristol Diocesan Association. At the end of each year the Treasurer gives me a cheque for my expenses, and I give him a cheque for the same amount under Gift Aid. The Treasurer does the same thing with his own expenses, as do the Chairman, the Peal Secretary and most of the Central Council Representatives. The result is a significant addition to our funds from the Taxman.
But this arrangement only works because none of us have to do it. We could all just take the expenses to which we’re entitled and do nothing more. So our donations of an equivalent sum are entirely freely given. We are not giving the same money back; we are making a freely given gift of the same amount.
A Capital Distribution
And the second essential point to our arrangement is this. Your Tower Fund can be distributed to your members as a capital distribution. You can approve a motion that winds up the fund and distributes the entire amount in equal shares – or, just possibly, unequal shares – to the ringers.
So if there are eight of you and a £2000 fund, you’ll get £250 each, and since the whole fund is being wound up, that £250 is a capital distribution and so not subject to income tax. It could be subject to capital gains tax, but since it’s well below the annual exception limit, that isn’t likely to trouble any of you – although see later if it does.
So the full arrangement is:
1. As a band, you wind up the fund;
2. As individuals you each receive your individual shares;
3. As individuals, you each freely give an equivalent sum to the PCC under Gift Aid.
Of course, any of you could walk away with the £250 if you wanted to. That’s an essential requirement of the arrangement. If you couldn’t, your equivalent donation wouldn’t qualify under Gift Aid. But are you really worried that one of you will do that? After all, you’ve all agreed what you want to do, and ringers are the most trustworthy people imaginable.
But you mustn’t – and I emphasise this most strongly – you absolutely mustn’t simply pass the money straight across from the Fund to the PCC. That just doesn’t work. Each of you must make a gift of money and you must make it freely and in a separate transaction. There can be no "netting off." You could, though, all hand your donation cheques over at the same time as you vote to receive your distribution money.
Tying up the PCC
And to make sure that the money will only be used on the bells, when you give your donation cheques to the PCC Treasurer do make sure they’re each accompanied by a letter making clear that it’s given under Gift Aid specifically for work on the bells and frame. That way, the money must by law go into a restricted fund to be used only for that purpose. Of course, most PCCs can be completely trusted in these matters but it’s always best to make things absolutely certain.
And if one or more members of your band are in one of the less usual positions as regards their tax affairs, the following specific points may help.
First, if any of them pay higher rate tax, they’ll get extra Gift Aid relief on their donation – see Ringing and Money 2. So if they want to end up in the same financially neutral position as everyone else, they’ll need to donate 33% more – i.e. £333 instead of £250. They’ll then get the extra £83 back from the Taxman when they complete their tax return.
Second, if any of your band are over 64 but with a marginally reduced Age Related Personal Allowance because of their total income – see Ringing and Money 8 – they may be able to donate up to 16% more than everyone else and then get that 16% back from the Taxman. Tricky to work out, though, so if one of your retired members is in any doubt, don’t let them give too much.
Third, if any of your band have already used their Capital Gains Tax exemption – or will have done so by the end of the tax year – they’ll have to pay Capital Gains Tax on all or most of their distribution. But since Capital Gains Tax is only at 18%, they can simply make a Gift Aid donation of 82% of their distribution.
And lastly, if any of your band aren’t taxpayers, they won’t be able to donate under Gift Aid. So they must either make a simple donation not under Gift Aid or, within families, consider another possibility.
The point here is that, although one of these donations must be made by a taxpayer to obtain the Gift Aid advantage, it needn’t be made by the band member himself. So if you have a married couple in your band and only one of them pays tax, it’s quite in order for the taxpaying spouse to make a double donation as long as the paying spouse doesn’t expect to be reimbursed by the non-paying spouse.
Be very careful about this last point though, because to qualify under Gift Aid the donation must be freely given and not as the result of a quasi-trustee relationship. That’s why paying for others normally only works within families.
So, equally, a non-band member can make a donation of the same amount as their spouse’s or child’s distribution as long as they don’t expect to be repaid.
But for many bands these points won’t be relevant at all.
And the final result?
Quite simply, the £2,000 in the Fund’s hands becomes at least £2,564 – and possibly as much as £3,333 – in the hands of the PCC.
What’s more, the work on the bell frame – being a repair – will attract VAT. The PCC, though, can reclaim that VAT under the Listed Places of Worship Grant Scheme – see Ringing and Money 5 – whereas the Tower Fund can’t. So that £2,564 becomes £2,948 of spending power – or £3,013 if the work isn’t done until 2010.
In short, a handful of letters and a five-minute meeting has turned £2,000 into £3,000 – a 50% return for doing almost nothing.
And what could be more satisfying than that?