Pricing at the British Library

Screen Shot 2014-03-06 at 2.57.56 PMAt the British Library, the special exhibition about Georgian England has a concession (old folks) price of ₤7, but also a listed concession (gift) price of ₤8. With the latter, one gets a receipt and can deduct the ₤8 from one’s income at tax time. If one is in the 20 percent bracket (taxable income from almost nothing up to ₤32,000), the net admission price is ₤6.40. So the incidence of the subsidy is typically shared nicely by the library and the taxpayer. But for the highest-income visitors — tax rate of 40 percent — the overwhelming share of the benefit goes to the taxpayer. I’ve never seen this double-pricing scheme made so explicit — and the sharing of the gains made so clear — in the U.S.

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  1. Jax says:

    Gift Aid in the UK is about letting the Charity claim back the tax not the individual.

    In theory we could but most UK residents on a PAYE tax system don’t claim charitable donations against tax unless it is a significant value (I frequently give items to charity shops but would never think of off setting against tax). The Gift Aid process was set up to legally allow the Charity to claim that amount instead with the individuals permission.
    The additional value is purely to increase the donation to the British Library in an easy way at the door rather than trying to solicit one later on

    http://www.bl.uk/whatson/exhibitions/georgiansrevealed/tickets/

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  2. Jeff Cotner says:

    Under U.S. taxes, you wouldn’t be able to (properly) deduct the full amount of the higher fee — only the excess amount over and above the regular admission price. The base amount is a non-deductible cost of admission; only the voluntary extra pound/dollar would be a charitable donation. Thus if those figures were dollars, the patron could only deduct $1 — not the full $10 for adults. If the charity purported to give charitable gift receipts for the full amount (even though it’s obvious that most of the money is paid for the entrance fee), I suspect the charity itself would be courting potential trouble from the IRS.

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  3. John Davies says:

    I think that’s not quite how it works. The _Library_ gets the tax back at basic rate, so the net price to a basic rate tax payer is £8. Only higher rate taxpayers get anything back directly.

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  4. Ben Parker says:

    I think this isn’t correct, unfortunately; with the gift aid price, a basic rate UK taxpayer can not claim anything additional back personally, however the charity does get the tax back on the 20%, so is worthwhile for the charity- for one pound more admission will mean the library gets substantially more (£9 + 0.25*9=£11.25)

    If the customer is a 40% tax payer, they can claim the additional 20% back personally, which would be £2.25. But this only applies to “Seniors” earning more than around £41,450, the rate at which higher rate tax become payable

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  5. John Hill says:

    You pay £8 to the Library under the Gift Aid option. You can only use this option if you are a taxpayer.

    The Library can then reclaim £2 (equivalent to 20% tax) from the Government.

    The Library therefore receives £10 from everyone using the Gift Aid option, regardless of their tax status.

    If you are a basic rate taxpayer, you cannot reclaim anything, so the net cost to you is still £8.

    If you are a higher rate taxpayer, you can reclaim £2, reducing the net cost to you to £6.

    If you are an additional rate taxpayer, you can reclaim £2.50, reducing the net cost to you to £5.50.

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  6. Joe W says:

    Meanwhile, the Tower of London (sneakily?) adds a “voluntary donation” (10% of adult price) when buying tickets online or in person: http://www.hrp.org.uk/TowerOfLondon/admissionsprices/toweroflondonadmission

    It’s voluntary, so long as you opt out.

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  7. Julia says:

    Umm not sure this is right. The extra £1 on the Gift Aid ticket is a minimum donation which goes to the British Museum. The Government gives 25p on the pound when donations are made through Gift Aid by UK taxpayers so the BM is effectively getting £8.25 on an £8 ticket, or maybe £10 if the whole ticket is counted. There’s no benefit to basic rate taxpayers except giving 25% more to charity.

    Higher rate (40 or 45%) taxpayers can declare Gift Aid donations and get the 20 or 25% difference back, though. So if 40% tax payer gave the museum £100 through Gift Aid, the museum would get £125 and the tax payer could get back 20% (£20) at tax time.

    Or am I hopelessly confused?

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  8. Olly Benson says:

    Julia is right and Daniel is wrong. UK registered charities can reclaim the tax on donations they receive, which generally is 25p in the pounds (although if the donation has come from a higher rate tax earners the donor can also claim the same amount). However, this must be on a donation, voluntarily given, not on a fee, so most institutions have a entrance fee and then an additional voluntary element that they can claim the tax relief on.

    The HMRC explains it all:
    http://www.hmrc.gov.uk/charities/gift_aid/basics.htm

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