In Friends of the Earth Trusts Limited v HMRC4, the FTT has held that payments made by supporters of a charity were donations and not consideration for the supply of a magazine and other benefits for VAT purposes. The charity was therefore not entitled to claim input tax on the cost of training its street fundraisers and its appeal was dismissed.


Friends of the Earth Trust Limited (FOTE), is a registered charity that aims to protect and improve the environment through campaigning, undertaking research, educating and publishing. Between May 2009 and May 2014, FOTE used a dedicated team of street fundraisers provided by a separate company to recruit members and seek donations. The street fundraisers were trained by FOTE but were encouraged to come up with their own pitches and develop  their own individual approach to obtaining donations.

FOTE provided members with, in return for a minimum payment of £3 a month, a selection of benefits including regular copies of its magazine “Earthmatters”. FOTE viewed the payments from its supporters, obtained by the street fundraisers, as consideration for the supply of the magazine and other benefits. As a result, the charity sought to claim input tax on the cost of training the street fundraisers. HMRC decided that FOTE was not entitled to claim input tax and FOTE appealed to the FTT.

FOTE contended that:

  • payments made by its members were consideration for the supply of the magazine and other benefits, not a donation
  • the supply was wholly or overwhelmingly a zero-rated supply of a magazine and that there was a direct and immediate link between the various fundraiser costs and the benefits.

FTT’s decision

The FTT considered section 5, VATA, which provides that a supply does not include anything done otherwise than for consideration and also relevant case law.

In Kuwait Petroleum5, the ECJ expressed the view that in order for a supply to be made “for” consideration, there has to be a legal relationship and reciprocity and for the parties to have agreed objectively that the price was paid for the supply. In The Serpentine Trust Limited v HMRC6, the FTT held that benefits offered to supporters of a charity for fixed payments were subject to VAT, contrary to the taxpayer’s argument that the cost of the benefits was minimal and the majority of each payment comprised VAT free donations.

The FTT said that, when viewed objectively, the £3 minimum monthly payments were donations and not consideration “for” the supply of the magazine and benefits. The payment was a gift to FOTE to be used in its charitable work and, as a consequence, the charity would send the supporter free copies of the magazine.

In reaching this view, the FTT was influenced by the following:

  • there was a low likelihood that the magazine and benefits were mentioned by the street fundraisers at the time the supporters signed up to the charity
  • the magazine and benefits received a low level of prominence in communications to the supporters
  • there were multiple references to the magazine as “complimentary” on the direct debit form
  • any perceived value that the magazine had would only become apparent to the member once they had received it.

The FTT therefore concluded that FOTE was not entitled to claim input tax on the cost of training street fundraisers and dismissed its appeal.


It is common practice for large charities to use street fundraisers provided by a separate company to obtain donations. If FOTE had been successful in its appeal, a number of charities may have sought to reduce the cost of training fundraisers through the VAT system.

Although the decision turned on its own particular facts, it does provide a clear summary of the principles to be applied when considering whether a payment is consideration for a supply for VAT purposes and emphasises that this requires an objective analysis of the circumstances of such payments and the benefits provided in return.

A copy of the decision can be found here.