I have a client who has a private nursery school. It is a ltd co with shareholding. It does not have charitable status.
The client wishes to raise money through fundraising from parents etc. to pay for trips, minibus.
From HMRC http://www.hmrc.gov.uk/manuals/bimmanual/bim41810.htm it states "voluntary payments or gifts, are not taxable unless they can be attached to a pre-existing source such as a vocation"
but also "if the character in the recipient's hands is that of a payment made in order that the money may be used in the recipient's business, to supplement trading or other business receipts and to enable the recipient to carry on business...then it will be a taxable trading receipt"
It is my opinion that such receipts would therefore be classed to supplement trading, and therefore be taxable.
My questions are these:
1. Do you concur that such fundraising receipts are taxable?
2. Could a separate vehicle be created solely for fundraising without implicating on the Ltd Co?
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Yes
Hi - went through a similar situation with a client who started as not-for-profit with tiny trade but then built the trade side to the point at which voluntary donations & gifts were effectively used to prop up the trade and so became taxable.
Fortunately they also have a charity to use in future but, again, if the charity was able to justify a grant to the trading company, it would still be taxable in their hands, ie the charity or not for profit company has to stand on its own and do it's own charitable/voluntary stuff, to avoid tax.
I'm no expert but the thought occurs that if the trips & events are outside the school's basic business then maybe this element could be sectioned off to be funded by voluntary donations? I'm sure this is how it works with a normal PTA but I'd imagine it would have to be run by the paretns rather than the school?