Associations tax regime for Saturday school

Associations tax regime for Saturday school

Didn't find your answer?

Dear all,

I have a friend from my son's school and she is running a French Saturday school. She took over from another mother and she received the constitution of the association and other forms.

She was asking me if I have some material regarding the associations, tax rules, and if the school can be run as an association. I have experience with charities but I know nothing about associations.

They already have a turnover of £50k, which is used to pay the teachers, rent, materials and organise different events. She is the treasurer and she asked me if she can pay herself a small fee due to the fact that she spends lots of hours to put everything together. Can she pay herself a fee in case she is an association member?

They are not registered with HMRC or any other body. Due to the high turnover, should they register with HMRC or any other organisation? Shall we send some accounts to HMRC?

In case they reach the VAT threshold, should they register for VAT?

I couldn't find much information about this and any help will be highly appreciated.

With many thanks,

Replies (7)

Please login or register to join the discussion.

By Steve Kesby
05th Mar 2014 12:17

Unincorporated associations...

... are liable to Corporation Tax like companies, unless they are charitable (which might be a possibility - there's no reason why an association can't be a charity) or engaged in mutual trading with the members of the association. Much depends on "the constitution and other forms".

i don't see why she can't pay herself a fee for her work, but she may be regarded as an officer of the association, meaning that PAYE should be operated, subject to thresholds.

It's possible that the income is VAT exempt, but again it's down to the status of the association (and whether it's an eligile body), which is dependent on the constitution and other forms.

Thanks (0)
Replying to NH:
avatar
By SE_Confused
05th Mar 2014 15:02

I have noticed this post and the issue of PAYE. got a similar prospect and they say all their teachers are self employed but surely that is not right? unless i am missing something.

Thanks (0)
avatar
By andrew.hyde
05th Mar 2014 15:14

Self employed

Slightly off the original topic, but for self-employed status claims, use the HMRC employment status indicator.  Just go to their site and bung 'employment status indicator' into the search field.

Returning to the OP, I think that there ought to be a PAYE scheme - almost certainly the teachers they are paying have other income - salaried or pensioned.

Yes of course the OP should be paid for her time. Nobody expects the techers to work for nothing.  But check out the constitution.  Is the office of treasurer 'honorary'?  It might be necessary to get back to the committee, or whatever is the governing body, and ask them to vote a reasonable rate of remuneration (probably with the proviso that resignation will follow refusal).

Thanks (0)
avatar
By WhichTyler
05th Mar 2014 15:51

basic Controls

It would be much better if someone other than the treasurer signed off payments to the treasurer! All cheques should be dual signature and no signing blank cheques. This isn't impugning treasurer's honesty, just avoiding the appearance of a conflict of interest...

Thanks (0)
avatar
By SE_Confused
06th Mar 2014 09:33

Many thanks and some other questions

Many thanks for all your answers.

The teachers are paid less than £5,000 per year. They have several teacher starting with year 1 to GSCE, By now they weren't registered through PAYE. Due to the fact that their income was less than £5,000 they even didn't register with HMRC.

The association is unincorporated. In this case should they send any forms to HMRC?

If their turnover goes over £70,000 should they pay VAT or change the business status from association to charity or something else?

 

 

Thanks (0)
avatar
By bggoose1
07th Mar 2014 11:40

Eligible body?

If it looks as if the association is going to get close to the VAT registration limit, you should seek VAT specialist advice asap (not me I hasten to add although I know the main issues) as in order for the services provided to be exempt from VAT under Sch 9 VATA, the association has to be an "eligible body" and unless someone gave this some thought at the outset it will almost certainly fail the test.  I have seen this a few times and it has been necessary to restructure completely or amend the constitution to ensure that it meets the eligible body criteria.  From what you have said, if properly structured it should qualify bit this is difficult to confirm without digging into this a lot deeper.  Proper specialist advice is required.

Thanks (0)
By jonsa
07th Mar 2014 14:23

PAYE

Because they are less than £5,000 p.a. there was no registration with HMRC.  If the teachers are PAYE, this does not make sense.  They are second jobs, so tax will be payable on whatever they are paid if they are employed.

Thanks (0)