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Local voluntary group is it taxable

Local voluntary group is it taxable

A local group has run for the last 51 years a carnival, fete etc.  It promotes the local village and any surplus profits are given away to the local school, children groups, parish council etc. We recently formed a ltd company limited by guarantee, to protect the committee.  Hmrc have now raised their head and said we should have been taxable for the last 51 years but by concession will not go back!.  We will have to complete a corporation tax return next year and obviously what money we give away to schools etc will not be allowable for tax.  We produce a programme of events each year and we charge local firms to put an entry in, i suppose we can say it is a donation, but this underwrites the whole day, the cost of the evening event is equal to the programme profit and we give away £1000 in prizes for the floats.  No individual benefits from the fund raising it all goes to local schools etc.

I am at the moment gob smacked, so much for the big society.  Please someone help me.

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23rd May 2012 13:40

Register as a charity...

HMRC are right. You will need to register as a charity which might not be straight forward because you may need to change your company's Mem & Arts to satisfy the charity commission.

In the first instance I would go to the Charity Commission website here: http://www.charity-commission.gov.uk/Start_up_a_charity/default.aspx for information on how to start a charity. It can be done online.

As a charity you will benefit from the relief given to charities under the gift aid scheme (can be 25% of the donation) as well as Corporation and other Tax reliefs so it is worth the effort.

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23rd May 2012 14:25

Alternative

Are the Schools etc who receive the donations charities? If so then donations could qulaify under the gift aid scheme and so reduce the profits down to zero.

 

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23rd May 2012 14:43

Agree with CCASPELL

I have registered various community associations, civic societies etc, if you want to PM me I'll point you at suitable articles of association

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brian-scholar
23rd May 2012 16:57

articles

Hi Chris

 

Sorry if you get this twice, i would like to be pointed to a suitable articles of association, we became a company in February.  Charity commissioners verbally told us that did not think we were an organisation that could be registered as a charity even though our turnover was over £5000.  I really did not think this was going to be a problem as other groups, football clubs with a bar and another similar venture all have exemptions from preparing and submitting corporation tax returns. 

 

Holly

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23rd May 2012 15:30

Agree with what is said

..but CC will only register you if your annual income is over £5,000 if less you can apply to HMRC to be seen as a charity for tax purposes - the forms are longwinded but it is possible. Being a charity is a fact - but you have to demonstrate botth charitable aims and public benefit - and you should be able to based on what you have said.

 

THis won't go away so you need to do something!! and to be fair to Cameron (did I really just type that???) this has been the situation possibly for all 51 years of your history!!

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23rd May 2012 16:48

We were told by charity commissioners by a telephone conversation that we would not be classified as a charity turnover is over £5000.  Therefore we become a ltd company incorporated by guarantee.  One comment by hmrc was that the articles said we could raise money and take on leases.  We do rent a store from the local council but do not raise money from loans.  We give to the playschool which is a reg. charity, the scouts, also, but the football and cricket clubs are not.  Not sure about the school as it given to the parents association.

 

If we have to pay tax the whole thing will fold as it is hard work.  If we had kept off the rador nothing would have happened.

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24th May 2012 14:48

Community Amateur Sports Clubs

Hi Holly,

Just picking up on your last point, there is an exemption for amateur sports clubs, but I think that is not what you do. You can find out more about the tax relief for Community Amateur Sports Clubs here: http://www.hmrc.gov.uk/charities/casc/tax-relief.htm

I think that the Charity Commissioners said you could not be registered as a charity because of something that may have been said that the company does that would be outside the remit of a charity. If your objects are charitable then you should be able to register as a charity without too much fuss. Remember, having charitable status is a real benefit in terms of tax so they don't make joining the club easy - it is a high bar to get over deliberately.

If you can afford an hour of professional time then a trip to a lawyer who specialises in Charity work with your current memorandum and articles of association might pay dividends as he/she should be able to tell you which clauses in these documents may prevent you from registering as a charity and how to fix them. Otherwise, take Chris Small up on his kind offer and compare his model documents with your current ones to see how they differ.

Changing the Mem & Arts of a company is usually pretty straight forward, requiring a minute and a vote with generally either 50% or 75% support for the motion.

Once you have your documents sorted you should be able to register as a charity yourself without too much bother by going to the link I put on my first answer.

Good luck and I hope the above posts have helped you.

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25th May 2012 08:17

charity status

Thank you everybody for the help.  Probably naive in taking the word of the charity commissioners in the first place.  Chris Small has pointed me to some mem and arts which should help and i will be in touch with the formation agents and charities com. today.  It is such a mine field you are trying to do your best to help a local community and having to protect your selves in case of legal actions. I would have thought hmrc would have been after bigger fish than us they can come to arrangements with vodaphone, why not a not for profit because we give it back to the community group.  Thank you Ccaspell, we would not be a amateur sport club as you say

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