3rd party income

3rd party income

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Our client's are a significant charity, who have been advised by previous accountants, that using themselves as effectively a "clearing house" is neither a tax issue nor a matter which could affect their charity status.

The position is that they receive money in the UK from various sources, not always fully documented, and then send the money abroad via money transfers where it is distributed to the needy. No receipts are available from the needy but the agent abroad will give a receipt. These transaction are very substantial collectively. The charity receives a handling fee and that is recorded as income.

They now realise the problems of what they are doing but wish to continue the practice in a safe way. 

Any suggestions please?

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By WhichTyler
10th Jul 2013 11:49

Start here:

http://www.charitycommission.gov.uk/running-a-charity/your-charitys-work/working-internationally

If they are acting as 'money transfer agents' for a fee do they have all the necessary permissions in place (e.g.FCA). If this is their source of income, it could be taxable as it is not earned in pursuit of their objectives, (but those of the other donors)

 

This sounds an extremely unusual way for a charity to operate, with a host of risks for the charity. I would suggest the trustees get professional advice from a legal firm experienced with charities to be sure they are doing things right...

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By jpcc1
10th Jul 2013 12:14

What controls do the trustees have in place to ensure the funds are spent on charitable purposes?

This is potentially money laundering and is a classic example of how terrorist funding etc can be moved around. Get professional advice immediately,

If, as you say, these are very substantial then you need to make a whistleblowing report to the Charity Commission immediately.

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