Fundraising for a Dance School

How to deal with parents funds

Didn't find your answer?

Hi, I am hoping for some opinions on a tricky issue.

Local Dance school, which my daughter attends, has an annual show which requires costumes for the 250ish participants (circa 1000 costumes). Myself and a number of other parent help sew costumes and source cheap costumes from online. This is done completely on a voluntary basis and there is no payment for services etc. The parents and the children fundraise to raise money for fabric and to buy costumes etc but this fundraising does not cover full costs. The costumes are hired out to the children for the performance (for a small fee) which covers the rest of the costs and the costumes are ultimately owned by the dance school.

The dance school has been told by both its book keeper and accountant that the fundraising money does not belong to the business and therefore should not be paid into the company accounts or logged on the company books, similarly the rental fee is not banked. This is all done as cash transactions seperate from the normal lesson fees.

In order to purchase fabric and costumes cheaply the majority of purchasing is done online and, therefore, requires us to be able to convert the cash either to a bank account, paypal account, prepaid debit card etc but all of these require the cash to be deposited into an account first? The bookkeeper insists that this money should not be deposited to the company accounts because it is not income, and the accountant has advised to use a personal account and cover any online transactions with the cash, but both the owner-partners and any of the parent volunteers are wary of depositing in personal accounts to allow online payments as this could lead to questions of tax avoidance? Does anyone have any experience of this kind of transaction and whether the advice recieved is correct? The dance teacher/ owners are in no way trying to avoid tax but are getting conflicting advice from their advisers, if it should be accounted for as income they are happy to do so.

Thanks in advance for any opinions, I dont want this to seem like a solicitation for free advice, the dance teachers have taken advice from both their book keeper and their accountant, both of whom have stated that they dont think the funds should be deposited to the companies bank account but cant advise/ agree on any way forward. The bookeeper doesn't think the money should be deposited into a personal account but the accountant doesn't foresee any issue. The accountant and bookeeper have both been up front that it is not an area either is familiar with or had to deal with before. 

Replies (10)

Please login or register to join the discussion.

avatar
By Sheepy306
13th Jan 2017 11:50

You've effectively said that the fundraising income + rental income - cost of fabric - cost of buying costumes = £nil.
You've also said that the costumes ultimately belong to the dance school.
It sounds to me perfectly correct then that the income is declared, the expenses are allowed, and the costumes end up on the balance sheet of the dance school.
Unless you're intending to hold the costumes in a separate entity, the treatment would be the same but they would end up on the balance sheet of that entity instead. Seems like a hassle though.

Thanks (1)
Portia profile image
By Portia Nina Levin
13th Jan 2017 11:59

Sounds like the bookkeeper and the accountant just cannot be arsed to be honest.

Thanks (3)
avatar
By ainsleyg
13th Jan 2017 12:14

Thanks for your feedback.

Part of the accountants argument is that currently the Dance School sits under the VAT threshold - by accounting for the costumes this could push them over the threshold? As a mainly services based business there would not be enough in the way of VAT Purchases to compensate for the VAT costs?

Also the argument from the accountant was that turnover would be increased therefore their corporation tax would increase?

As I am not party to the actual set up, e.g. how the dance school is set up legally, I may not be aware of the full circumstances of their other arrangements. But it still leaves us with the impossible situation that we have funds available in cash but purchases need to be made online and no way to transfer the funds to an account which would allow this, if the advice of not accounting in the company accounts is adhered to. Unless the funds are paid to a personal account....

Thanks (1)
avatar
By Sheepy306
13th Jan 2017 12:47

Is there any other very relevant information that you haven't mentioned?

Thanks (0)
Replying to Sheepy306:
avatar
By ainsleyg
13th Jan 2017 13:50

Not sure what you mean by very relevant - I had thought the corporation tax and VAT would be standard considerations but shouldn't change the way the income is treated?

If its income its income surely (?) regardless of whether it increases VAT or corporation Tax but I apologise if this should have been mentioned initially. I am not involved in accounting/ finance at all except for a general interest so if I missed anything I am sorry. I am simply trying to help them find a solution as right now they seem to be stuck with funds they cant bank or spend on what is needed.

Thanks (0)
By Tim Vane
13th Jan 2017 14:04

So, you have an accountant who thinks that Corporation Tax is based on turnover and who is recommending that transactions be artificially omitted from the books in order to keep it below the VAT threshold.

You need another (honest) accountant. Most local dance/drama schools come up against the VAT threshold sooner or later if they are successful. Most deal with it without resorting to bent bookkeeping.

Thanks (3)
Replying to Tim Vane:
Portia profile image
By Portia Nina Levin
13th Jan 2017 14:15

The only thing that will be missed of the VAT Return is the costume hire. I cannot see any other supplies.

Thanks (1)
Replying to Tim Vane:
avatar
By ainsleyg
13th Jan 2017 15:15

Thanks for your response Tim, as mentioned I don't hold an interest in the company, I am just involved as a volunteer, but will pass on your comments to the owners (young girls, first business, relying on their accountant for advice). The bookkeeper and the accountant are separate entities and both believe the money should not be accounted for in the books? Is this simply as Nina suggested that they can be bothered with the additional work?

Out of interest, if the fundraising (not the hiring) is carried out by the parents and kids directly (Via sponsorhip etc) would that be a transaction of the dance company or would the money/ costumes be considered a gift to the company? (Can a gift be made to a company?) Again, this is not based on any financial knowledge at all but I just wondered? I understand with the costume rental being income but with initial fundraising are the parents not giving to the company without expectation of something in return (they only get a costume if they pay the rental)? Does that even make a difference?

Thanks (0)
avatar
By Accountant A
13th Jan 2017 16:12

The words mountain and molehill spring to mind.

If it's "Local Dance School" money, it goes in the Local Dance School bank account and accounts, whether or not the accountant and/or bookkeeper like it. If it's not, then open a separate bank account for "Friends of Local Dance School", which can be dealt with as a separate entity.

Thanks (1)
Replying to Accountant A:
avatar
By ainsleyg
13th Jan 2017 16:20

Thanks for your response, I will refer it back to them. I wouldn't personally want an account in my name (even if as friends of the dance company) when I have no legal connection to them. Ultimately, I think they are unsure if it is "local Dance School" money or "Friends of Local Dance School" money and that is the issue. Their advisers say the latter but they are wary that is they pay this into a non company account that this could be construed as them avoiding taxation. I'll let them resolve

Thanks everyone for your responses.

Thanks (0)