Charity Fundraising

What is this guidance about?

This guidance explains the statutory controls regulating fundraising and provides:

  • general advice on effective fundraising;
  • an explanation of charity trustees' legal responsibilities in relation to fundraising;
  • information about the tax implications of fundraising; and
  • a list of useful sources of information.

Effective charitable work depends on securing adequate resources. In many cases this depends on effective fundraising.  As fundraising is one of the principal influences on the public's perception of charity, the methods used and the integrity of the fundraisers are crucial to public confidence. It is very important that trustees manage and control fundraising effectively, efficiently, and economically. The highest standards need to be adopted and systems for protecting the money raised need to be put in place.

How to Choose your Fundraising Method

The choice of fundraising methods is a matter for trustees to decide. However, charities need to be alert and sensitive to public opinion and criticism. Fundraising methods which meet with disapproval can damage the charity and reduce public confidence in the sector as a whole.

It is essential to spend time before undertaking any fundraising exercise to develop a strategy.  Some forms of fundraising can be costly and it is important to be sure that the costs will be justified in terms of a realistic return. The strategy will need to cover the following points:

  • The need for funds - are funds required for a special project or part of the charity's rolling programme of work? How much is needed? Would it be possible to collaborate with other charities operating in the same field to meet the need?
  • Possible sources of funding - for example, grants from local or central Government, grant making charities or companies;
  • The resources available to support fundraising - fundraising costs money. Costs can range from producing appeal literature to employing a professional fundraiser and organising fundraising events;
  • The proportion of gross receipts which will be left after fundraising costs have been met. We strongly recommend that trustees agree, in advance, the likely proportion of the gross receipts which will be spent on the costs of fundraising. Actual performance needs to be monitored against that target and the trustees should satisfy themselves that the expenditure is justified.

Before committing expenditure to fundraising it may be useful to obtain advice from an appropriate professional or specialist. The Institute of Fundraising and the National Council for Voluntary Organisations keep lists of freelance fundraisers and consultants.

Appeals for funds

Whatever type of appeal is chosen by trustees to raise funds there are certain points which trustees should bear in mind:

  • The purpose of the appeal should be clearly expressed. Where the appeal is for general funds then any specific project mentioned in the appeal document should be clearly identified as an example of the charity's work. Care needs to be taken so as not to mislead donors into thinking that their money will only be used for a particular project identified in the appeal literature where this is not the case.
  • If the appeal is for a specific project then it is very important that there are plans to deal with any unspent money and that these are reflected in the fundraising document. This will enable trustees to deal with any surplus funds that are raised over the appeal target or if the appeal fails to apply the money which was raised.
  • Where possible set an end date for the appeal.

Telephone fundraising and broadcast appeals

Where the telephone is used to raise funds, it is the trustees' duty to ensure that the public are clear which charity the funds are for, what percentage of the donation will be spent on the objects of the charity and also ensure that all funds raised are transferred directly to the charity.  The Institute of Fundraising has produced a code of practice for telephone fundraising.

Chain letters

Chain letters are not illegal but their use is generally discouraged by us and the Institute of Fundraising because they can be difficult to control. Once started they are difficult to stop and can give rise, when the appeal target has been met, to claims that the charity is misleading the public.

Statutory provisions controlling fundraising

Street collections

Raising money or selling goods for charity in streets or public places usually requires a permit or license from appropriate local authority

House-to-house collections

House-to-house collections must have a license or an exemption. Exemptions from the need to obtain a license may be granted by:

  • The Home Secretary - for a collection over a wide area (the whole of England and Wales or a substantial part of it); or
  • The local Police - for a local collection to be completed within a short period.

The term collection includes visits from house-to-house, and also visits to public houses, offices and factories to appeal for money, other property (for example clothes) or to sell things on the basis that part of the proceeds will go to a charity. At present these collections are regulated by the House-to-House Collections Act 1939, and the House-to-House Collections Regulations 1947 and 1963.

New Regulations for public charitable collections

The Charities Act 1992 (Part III) makes provision for new Regulations to be made governing public charitable collections to replace the separate existing legislation on street and house-to-house collections. No date has yet been set for the new Regulations.


Charities may run lotteries in order to raise funds for their charitable purposes as defined in Section 3 and 5 of the Lotteries and Amusements Act 1976. The profits of such lotteries that are promoted by charities or by subsidiary companies on their behalf are exempt from tax provided the lottery is conducted within the requirements of this Act and the lottery profits are applied solely to the purposes of the charity.

Where a subsidiary company, rather than the charity, is registered as the society under Section 5 of the Lotteries and Amusements Act 1976 the lottery profits will belong to the company and not to the charity for tax purposes. The exemption will not apply and the company will need to pass the profits to the charity under Gift Aid to obtain relief from tax.

There are two main types of lotteries of interest to charities both regulated by the Lotteries and Amusements Act 1976 as amended by the National Lottery etc Act 1993:

  • small lotteries; and
  • society lotteries.

Small lotteries

Small lotteries do not need to be registered but they have to be incidental to an exempt entertainment. Exempt entertainments are defined by the 1976 Act and include fêtes, bazaars and dinner dances. Certain conditions have to be met which include no cash prizes, the sale and issue of tickets and announcement of the results must be carried out during the entertainment and on the premises where it is held and no more than £250 can be spent on buying prizes.

Society lotteries

Where a charity is promoting the sale of lottery tickets which will exceed £20,000 in value (or if taken together with sales from previous lotteries in the same year will exceed £250,000) it will be necessary to register with the Gambling Commission. Charities conducting lotteries below these thresholds are required to register with the local authority.

There are detailed statutory regulations about the conduct of lotteries covering accounts, age restrictions, the maximum price of tickets and the amounts which may be paid out in prizes and deducted for expenses. Trustees are advised to consult the appropriate local authority or the Gambling Commission for further advice

Professional fundraisers and commercial participators

Where trustees decide to raise funds by employing a professional fundraiser or by entering into a promotion with a commercial participator they need to be aware of the provisions of Part II of the Charities Act 1992 (as amended by the Charites Act 2006) and The Charitable Institutions (fundraising) Regulations 1994 (SI 1994/3024).

What are the requirements for agreements between charities and professional fundraisers or commercial participators?

The requirements include:

  • A written agreement, in a prescribed form, between the charity and the professional fundraiser or commercial participator.
  • A statement to be given to inform potential donors what proportion of their donation will be used to pay the costs of the fundraiser.
  • The public to be informed how the charity will benefit from its involvement with a commercial participator.
  • The transfer of funds raised by professional fundraisers or commercial participators to the charity.

The 2006 Act also requires paid trustees and paid employees of charities to make a statement if they are soliciting for funds on behalf of a charity. These statements must include:

  • The position of the collector within the organisation.
  • That they are paid to be in that position.
  • The name of the organisation for which they are collecting.

These requirements do not apply to individuals who are paid less than £5 a day or less than £500 per annum. These requirements do not apply to unpaid trustees or volunteers.

Further, more comprehensive, guidance on the changes made to the 1992 Act by the 2006 Act has been published in draft form by the Office of the Third Sector, and is available from their website.

Charities' connected companies

The rules do not apply to fundraising by a charity itself or, for most purposes, by a connected company, ie one wholly owned or controlled by one or more charities. However, we recommend that the company comply with the legal requirements as a matter of good practice. For example, a subsidiary trading company which operates a number of shops on behalf of a charity, might display at the till of each shop a notice stating that all the profits are paid to the charity.

Fundraising events and tax

Not all fundraising events undertaken by charities will be tax exempt. Equally not all events on which there is no tax to pay can be undertaken by charities.  There are special rules about charities and trading, these are complicated and you should contact Plummer Parsons for more information.

Is there tax to pay on a fundraising event?

Since 1 April 2000, charities no longer have to deal separately with the Inland Revenue and Customs and Excise to determine whether fundraising events qualify for exemption. If the event meets the criteria for VAT exemption, then they will automatically qualify for the purposes of the exemption from Income Tax and Corporation Tax.

Under the Value Added Tax (Fundraising Events by Charities and Other Qualifying Bodies) Order 2000, there are three key elements in deciding whether there is tax to pay on a fundraising event. These are:

  • The event must be organized and promoted exclusively to raise money for the benefit of a charity, or another qualifying body. 'Other qualifying bodies' include a charity's wholly owned non-charitable trading subsidiary.
  • The event must be one that can be held for fundraising purposes.
  • There is a limit to the number of events of the same kind at any one location in any one financial year of the charity.

The following list, which is not intended to be exhaustive, sets out some of the different kinds of event that may, in the view of HM Revenue and Customs, be held for fundraising purposes:

  • A ball, dinner dance, disco or barn dance.
  • Performances: for example concerts, stage productions, and other events which have a paying audience.
  • Film showings.
  • A fête, fair or festival.
  • Horticultural shows.
  • Exhibitions - including art, history, science etc.
  • A bazaar, jumble sale, car boot sale, or good as new sale.
  • Games of skill/contests/quizzes.
  • Firework displays.
  • A dinner, lunch, or barbecue.
  • An auction of bought-in goods.
  • Raffles or lotteries.

There is a restriction to 15 events of the same kind at any one location, in any one financial year of the charity. This means that, for example, a charity could hold up to 15 events of the same kind in each of a number of different towns or villages, and still qualify for the reliefs for all of these events. However, the reliefs do not apply to any events of the same kind at a location if more than 15 are held there in a year. So a charity which held say 16 events of a particular type in one location would have to pay tax on all of them. The reliefs do apply to events of different kinds held at the same location (subject to the 15 limit).

Any event, or succession of events, of the same kind in a particular location will not be counted in the figure of 15 if the weekly turnover of the event(s) is not more than £1000. If the weekly turnover exceeds £1000, then that particular event or those events are not small scale events and will count towards the 15 events-of-the-same-kind-per-location allowance.

Where an event is not covered by any of these concessions or exemptions then tax relief may still be obtained where a separate body carries out the event and donates the profits to charity via the Gift Aid Scheme.