This will help you to decide whether you need to treat an auction prize as a donation. The guiding principle is that, in all cases, you should make an honest assessment, based on the facts, of the value of the item or service that is being auctioned or raffled.
This will be straightforward for most items. However, for some it will be more complicated. The examples in the next section will help you understand how you should approach your assessment.
When is an auction prize a donation?
There are two possible donation “components” to auction prizes:
when you receive an item or service for auction
when you auction the item or service
Receiving the prize
You need to report an auction prize when you receive a prize for auction either without charge or at a non–commercial discount. This counts as a donation to you if:
the value of the prize, if the item is given free of charge exceeds £500, or,
the amount of the discount exceeds £500
If the item is given free of charge, the amount of the donation will be the value of the item. If the item is given at a discount, the amount of the donation will be the value of the discount.
At the auction
A further donation is made to you if the buyer pays more than the prize is worth, and if the difference between the item’s worth and what the buyer pays is more than £500.
If you pay the full value of the item when acquiring an auction prize, no donation has been received at that point. If the successful bid for the auction prize is at or below the value of the prize, no donation has been made. If the successful bid for the auction prize is more than £500 above the value of the prize, then a donation has been made.