Not-for-Profit Organisaton - accounts needed?

Not-for-Profit Organisaton - accounts needed?

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I've recently taken on a new Ltd Co client. Entwined with their Ltd Co is a "not for profit" organisation with its own bank account. It is notionally a partnership, though no-one really knows and it's never registered as a separate business, and any 'charitable' clients have been put through the NPO's turnover instead of the Ltd Co. The directors/ 'partners' have not been strict in paying money into the right bank account or paying suppliers out of the correct business, so there are a lot of contra entries and cross-references clearly indicated in their books.

There is a large invoice from the Ltd Co to the NPO for services rendered (use of vehicles, office, staff etc) which wipes out all profit in the NPO. This business arrangement was okayed by the last accountant, who is from an established first of Chartereds, so one assumes they were comfortable with the arrangement. His advice to the bookkeeper was to wipe the profit to nil in the NPO thus ignoring it and just having to deal with the Ltd Co.

There are no 'artificial separation' issues as far as VAT is concerned.

My gut feeling is that this ought to have been registered as a partnership and accounts submitted, even though there is no tax due, and any profits made by the business are being taxed through the Ltd Co.

This arrangement is not ongoing and the year I am dealing with is the last year we will have any issues with it.

Does anyone have any thoughts? I'm preparing the Ltd Co accounts and I'm having to look at the NPO in tandem and it's doing my head in!!

Thank you.

Jemima

Replies (2)

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By frauke
01st May 2007 16:23

NPO
It would be worth doing a seperate set of accounts for the NPO.

It does not have to be registered anywhere, although it should have a consititution, and preferably a set of rules etc. to make sure it can have the NPO status.

The main reason is they may be a problem in the future - if the Ltd company is ever investigated.

I notice you mention "charitable" clients - if the turnover of the organisation is over £5K (since 23 Apr 2007, £1K before this date) it may have to be registered with the Charity commission.

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By AnonymousUser
02nd May 2007 20:41

npo
Thank you Frauke, I will bear that in mind.

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