North Yorkshire Moors Railway General Discussion

There's also the whole charity law side of it, which is that once you have donated money to a charity, there are very strict limits in how that money can be returned. Gift Aid is irrelevant in that bit of the picture: the critical thing is that what you made was a donation, not a payment for a service. The essential part of that is that if a charity accepts a donation, there are only really three ways it can be returned: if the Trustees subsequently discover that the donated money was obtained fraudulently; if they determine that keeping the money would be reputationally damaging to the charity; or if the money was donated for a purpose that doesn't fit the charity's purpose.

It seems to me that the picture is very clear and unambiguous in this area, and of all the charities I have looked at that offer a "donation in exchange for seeing the work of the charity" scheme, the NYMR is unique in how it has layered on an entirely irrelevant bit of consumer legislation to enable refunds.

Tom

 

There are two potentially conflicting pieces of law in play here......a far from unusual situation especially where tax law is involved. The first is the Consumer Rights Act 2015 . Does it oblige heritage railways to offer delay/repay? In the near universal terms on which operators over the national rail network have signed up to the answer is No.

However, it can oblige heritage railways to provide full or partial refunds if their service is not provided as reasonably expected. Where the heritage railway has published a timetable it's reasonable inference that having purchased a ticket passengers will be able to travel at something approximating to the advertised times. The terms and conditions may explain that reliance on heritage traction means a greater likelihood of delay or cancellation but what they can't do legally ( as some still attempt) is state that refunds will not be made under any circumstances. If they are silent about when refunds can be claimed then the most likely arbiter of any refusal to compensate a passenger will be the local trading standards function. Where will its officers look for a precedent? Quite likely the delay/repay schemes of national network operators with which passengers will be increasingly familiar and have developed expectations accordingly. So delay/repay at national network levels may be imposed via the back door. Better surely have terms and conditions that include more restricted lower refund conditions in compliance with the 2015 Act?

It's correct that the tax legislation specifying the conditions for Gift Aid stipulates that refunds must not be possible under any circumstances. It also specifies that while payment of, in effect, the ticket price, is deemed to be a donation it's must allow admission to view charity property which in the case of a heritage railway involves travel by train. Passengers are subject to the railway's bye laws and conditions of carriage involving their transport. It's clear that a service is being provided. Where it is the Consumer Rights Act applies. How to resolve the obvious conflict? Look to the purpose and intent of the legislation. The Gift Aid conditions stipulated by HMRC are its interpretation of the applicable tax legislation. They are designed to ensure that Gift Aid isn't recovered by the recipient of a Gift Aid donation if all or part of that donation can be refunded. In practice the application for recovery of Gift Aid is made some time after the service has been provided. If during that period a Gift Aiding donor demands a refund the obvious response is NO so long as the Gift Aid donation stands. However, the donor may be offered the choice to unwind the Gift Aid transaction. Rescind the donation and treat the purchase as a normal ticket purchase and then a refund may be possible if the conditions for it have been met. If the donor chooses that option no claim for Gift Aid recovery is made. The spirit and intent of both pieces of conflicting law have been met

 

But I thought the whole point in gift aid was to aid the charity, to help run a linear museum? Are tickets are to allow people to view the work of the charity, or are you providing a transport service?

 

An argument that opens up a dangerous can of worms! I've even seen heritage railway terms and conditions that claim that the operation of train services is not to transport those buying tickets from A to B (and back) but to provide a heritage experience. However, the exemption from VAT that heritage railways benefit from is precisely because they are accepted as providing a transport service.
The relevant tax legislation specifies that a Gift Aid donation confers the RIGHT of admission to view the work of the charity. In the case of a heritage railway that includes the RIGHT to travel on a train in order to be able to view the charity's property. If there's a right there's a corresponding obligation to transport them (and hence the contractual supply of a transport service.) Providing such a VAT exempt transport service is an integral part of the admission for which a Gift Aiding passenger has paid by way of something that,for tax purposes, is deemed to be a donation.

 

Unless they're a lawyer!

Nol

 

That is where I think your argument was and is fundamentally flawed, and a category error.

The error is in two parts:
1. The application of a VAT rule to the treatment of a provision related to Income and Capital Gains Taxes
2. The assertion that a right to visit including the right to travel confers a wider set of consumer rights in response to a donation.

The Gift Aid and VAT regimes exist in parallel; in the absence of legislation, explicit guidance from HMRC addressing this circumstance, or precedent setting findings in the courts, the opinion proffered is contrary to explicitly stated Gift Aid regulations and Charity law governing the acceptance and return of donations.

 

Just for clarity does the legislation specifically state that a heritage railway must provide travel for the donation? Presumably though, even if it does, the legislation cannot confer a right to travel upon a specific service. That would be a most unusual situation. And so I can quite see how the charity is accepting an obligation to provide the right to see the charity in action, and that that right involves a train service. It surely doesn’t follow though that a gift freely given confers a right to a specific service.

In any case I still think this is being massively over complicated by the delay repay scheme. First, don’t habitually run late and don’t plan events so badly that they do. Second, don’t offer complex processes of reimbursement especially where 99% of customers would have no expectations of such (if they don’t have them created for them) - if you feel you have to recompense a customer provide a full or partial refund or a free ticket for the future based on a simple set of terms and conditions and the operation of a good customer service organisation. Three, for gift aid customers, offer them the opportunity to return on another date for free and a goodwill voucher if you have really fouled up.

Delay repay is a crazily complicated way of dealing with a problem that should not exist in the first place
, and isn’t generally what the customer wants anyway.

 

All of which comes back to the perverse decision of NYMR to treat provisions of tax and charity law as though they are governed by commercial and consumer law, rather than inhabiting wholly separate spheres.

 

"A voluntary donation that allows visitors to view your property will not qualify for Gift Aid if the terms and conditions attached to an admission fee include a right to a full or partial refund of the payment. For example, in the event of bad weather, cancellation of an exhibition or mechanical failure of an exhibit.

This is because under the Gift Aid scheme a donation cannot be repaid under any circumstances."

Not my words but those of HMRC. You cannot subsequently decide that a donation is not a donation. I really do think that you are squirming on this subject in your attempts to justify what the NYMR is doing. There are learned people telling you that you are wrong (and I'm not including me in the learned ones.) Where has the advice that you can give refunds come from? Are the other Trust and PLC directors aware of the nightmare possibility of having to repay to HMRC all the gift aid monies that they have claimed?

 

It is perhaps worth noting that the VAT exemption only applies to services where there is the possibility of a break in travel. That is to say if I could use the train as part of a journey to a place other than the place of starting and return at another time. In practical terms, travel on a standard service is VAT free. The travel element of a dining service is not. Railways where there is no means to leave the train other than where you start the journey are not VAT free.

 

Absolutely my understanding. You can invite them to come another time if you want to, and it would good for the relationship, but it isn’t an obligation!

 

We’re revisiting well trodden ground! I agree that good customer service should deal with most problems but there’s still a residual belief that heritage railways can maintain a no refunds policy. Whether tickets have been purchased to travel on a particular train is not the determinant of whether a passenger may be entitled to demand a full or partial refund. The question is whether an advertised service was provided as reasonably expected. My point was that if you try in vain to exclude any possibility of a refund or say nothing the level of compensation may be decided by a third party quite likely by reference to delay/repay on the national network. Offering free trips on another day can be part of your armoury as can vouchers, paid for taxis etc. but ultimately the passenger has statutory rights.

 

I guess one doesn't have to be a lawyer after all! (I'm trying to remember what you did outside of the railway; I seem to vaguely you saying, at one point.)

Noel

 

I don’t think anyone is arguing a consumer doesn’t have rights. , EXCEPT where gift aid is involved. Where that is involved the consumer rights cannot apply. They are not a consumer, they became a donor. What you do to address the relationship harm of poor service cannot involve a refund in part or whole, and there are plenty of other things you can do. Delay repay should not apply to gift aid customers, in fact it cannot so far as I can see, unless you treat it as free gift back to the donor unrelated to their donation. Unwinding the gift aid isn’t an option so far as I can see.
The terms and conditions should probably state that a gift aided ticket is not refundable.

Also, if you allow matters to get to the point where a
Third party gets involved in determining compensation you failed. There will have been many opportunities to settle amicably before that. I just cannot see delay repay (on a heritage line) as anything other than a solution looking for a problem.

 

Absolutely consumers have rights. But these aren't consumers, they are donors: the nature of the transaction is fundamentally different.

The whole edifice of obtaining Gift Aid on visits to your charity is built on the foundations that people are making a donation; they are not purchasing a service. Strip away that and the whole basis by which you reclaim Gift Aid crumbles.

Tom

 

When I give to a charity, I do not have consumer rights. I waive them, because I donate money to that charity - whether or not I receive something in return.

I do wonder what the visitor attraction section of charity sector would think to one charity exposing a very useful policy loophole to legal scrutiny, and causing HM Treasury to decide "it's losing us money - stop the concession"? And that, let's be clear, is the potential consequence of 3rd party intervention in NYMR's system - which might include "disgruntled of Whitby" deciding that the delay repay offer is insufficient and that they should be entitled to more compensation.

The motivation is sound, the logic for the method isn't ridiculous (though I agree with @21B that the application of this to a heritage railway raises significant questions over the category application), but the footings are just completely wrong because of the basis on which NYMR are seeking to obtain much of their income.

Have NYMR asked HMRC for confirmation that this policy is consistent with Gift Aid legislation? If so, did they provide a positive confirmation?

 

Has the NYMR had to make many (any) delay repay payments since the system was introduced?

 

Tom,
I don’t dispute that the relevant legislation deems the payment to be a donation for tax purposes. However it also makes it explicit that the donor is purchasing the right of admission. If a right to be admitted and to travel has been created for which consideration has been provided there is a contract to provide a service to which the Consumer Rights Act applies. HMRC rules are that there must be no right to a refund. As long as the donor sticks by their election to Gift Aid there isn’t but they have a choice. An option to rescind their Gift Aid election and then to assert their right to a refund is not the same as a right to a refund existing alongside the currency of their Gift Aid decision. The Act also requires that the service on offer must be available to non Gift Aiding purchasers at the same price before applying any Gift Aid uplift. It cannot have been Parliament’s intention to strip away consumer entirely from those opting to support a charity simply because for tax purposes payment for admission and travel is deemed to be a donation.

 

The implicit arrogance in that one phrase is quite astonishing!

 

There are a lot of assumptions in there, all of which read like a barrister's argument for why your interpretation is correct rather than a statement of fact for why it is right. I am very wary of turning "should be" into "is", because my experience is that most such "should be" arguments are at best partial.

I can see a certain logic in swapping the nature of the donation, but that raises important questions about the Gift Aid treatment - last time that I had to return Gift Aid because of a returned donation, the review period went from about 1 week to 3 months.

I therefore repeat my previous question. Has this interpretation been raised with HMRC? If so, did they positively confirm that this interpretation is correct?