The UK government has recently published its response to the consultation on the Digital Markets, Competition and Consumers Act (DMCCA) 2024, which introduces a new regime to regulate subscription contracts. While the legislation aims to protect consumers from subscription traps, it had raised significant concerns about a potential loss of membership income and the impact on Gift Aid eligibility within the charity sector.
Following extensive engagement with the sector, the government has now announced an exemption for charitable memberships, ensuring that the new rules do not undermine the financial stability of many non-profit organisations.
The drive for reform
The subscription market in the UK is vast, with consumers spending approximately £26 billion annually. However, an estimated 9.7 million subscriptions are unwanted, often because people find it difficult to exit contracts after a trial or auto-renewal. The DMCCA 2024 was designed to tackle this by requiring:
- Clearer pre-contract information.
- Regular reminders before contracts auto-renew.
- A 14-day ‘cooling-off’ period both at the start of a subscription and after a 12-month+ contract renews, allowing for cancellations and refunds.
- Straightforward exit processes, including the ability to cancel online if the sign-up was online.
Why charities were concerned
Cultural and heritage charities highlighted concerns about how the new subscription rules would apply to their memberships which, for example, grant free or reduced-price entry to museums, galleries, heritage sites, and performances.
These charities rely on income from their membership schemes, and these rules posed two major threats. First, there was a risk of ‘use and cancel’ behaviour. Charities argued that a member could sign up, visit multiple heritage sites or attend exclusive exhibitions during the 14-day cooling-off period, and then cancel for a nearly full refund.
Secondly, charities highlighted the conflict with Gift Aid principles because Gift Aid cannot be claimed on payments that are subject to a right of refund. If all memberships became legally refundable under the DMCCA, charities faced the prospect of losing millions in Gift Aid income.
In its final response, the government acknowledged the “valuable work done by cultural and heritage charities,” and committed to legislate to exclude certain charitable memberships from the DMCCA. This exclusion applies to contracts between a charity and a consumer that allow for:
- Attending performances.
- Viewing collections.
- Visiting places related to the charity's purpose (such as museums, galleries, historical properties, or wildlife sites).
This means these specific memberships will not be subject to the additional regulations regarding cooling-off periods and refund requirements introduced by the new regime. Instead, they will continue to operate under existing consumer protections.
Cultural and heritage charities have welcomed the news. Hilary McGrady, director-general of the National Trust explained that, without the exemption, the reforms would have cost the sector “millions of pounds” and hampered charities’ ability to provide public benefit.
The government has also addressed the technical concerns regarding tax relief. It has clarified in Gift Aid guidance that mere compliance with consumer law does not prohibit Gift Aid claims. This provides essential certainty for charity finance professionals and trustees that membership income can still be enhanced by Gift Aid, even as consumer rights landscape evolves.