Hello,
I run a non-profit organisation. We don't currently accept donations as we are not a registered charity. But I have a large number of people and companies now wanting to donate to us. So I have begun the process of becoming a registered charity. The consultant helping me with it tells me it may take 3-4 months to compete.
My question is, can I accept donations prior to being a registered charity, and if so what are the tax implications? I can setup a bank account in my organisation's name, which all monies would be paid into. But would I still have to pay tax on the donations I receive before I am registered? Turnover will be above the annual £5k charity commission threshold.
Many thanks
Replies (5)
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The answer, as often the case, is "it depends". If you are operating some charitable function (albeit not yet a registered charity) you may find an accountant willing to advise you on a pro bono basis. They'd be better placed to do that knowing all about your activities.
not for profit on its own is meaningless phrase
If the activity is not specifically exempted from tax, the fact that it is "intended" that any funds generated will be applied for beneficial purposes is essentially irrelevant, as is any statement/intention that any activity undertaken itself is not being conducted with a view to generating profits. If it did in fact make profits or had other source of taxable income, it would in principle be taxable. The activities themselves of the entity undertaking them really would need to rely on specific charitable exemption being obtained to avoid any taxation implication. Even with registered charities, such exemption does not extend to trading activities undertaken to generate charitable funds- there have to be additional arrangements to reduce the otherwise taxable profits arising, eg formerly by the old covenanting arrangements for separate trading companies, or current alternative of making Gift Aid payments. So best advice would be to ensure registration as a charity and confirmation by HMRC of exempt status before accepting donations.
It's a gift
Gifts are not taxable. Donations are gifts.
If you're not trading then any income received is exempt from tax.
Trust?
Would it be possible to receive the donations and hold them on trust to be introduced when charitable status is achieved, or returned if it isn't? You may need legal advice (unless the consultant can advise and has the relevant PI cover). It's also not clear if the charity is going to be a new entity? And trading is an issue too as others have said.
So you will need some specific professional advice, which you may have to pay for...
Register with HMRC for Gift Aid?
I am not an accountant, but was involved on the committee establishing a Blood Bike group as a charity. We weren't allowed to register as a charity until we had £5k income, but because we could demonstrate that we had a charitable purpose, through our constitution, we could register with HMRC in order to claim Gift Aid on donations. As you are in the process of registering as a charity, I assume you must have a constitution that sets out your charitable purpose.
Good luck