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Accounting for charity fundraiser ticket sales

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Hi, I represent a community cinema setup as a CIC. We recently co-hosted a charity fundraising event for two local charities with a local entertainer. We screened a film and it was followed by a Q&A session. We would like all ticket sales (minus booking/transaction costs and event expenses) to go to two charities. As the cinema we have collected the funds from those who have attended and now need to transfer those funds to the co-host so he can distribute them to the two charities after deducting some event expenses. How do we account for this in our books?

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Scalloway Castle
By scalloway
05th Feb 2017 21:36

There are various ways to do this. You could create a single code and put all income and expenditure through it so that it zeros out. Depending on your accounting system you could create sub codes under one main code. Or you could have as separate income code and expense code.

How you do it depends on what you want to see and the reporting requirements of the CIC.

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By dgilfillan
05th Feb 2017 22:18

Thanks your quick reply. I'll put them under separate codes, but what paperwork will I need?

The co-host isn't a charity but rather will distribute the proceeds directly to the charities concerned. Are we ok to transfer the funds to him via BACS or does the transfer need to go to to the charities? I just want to make sure the CIC is covered from all tax/regulatory liabilities.

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By Cheshire
05th Feb 2017 22:21

Suggest you transfer direct to the charities so you know they actually get it.

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By dgilfillan
05th Feb 2017 22:45

That's what I thought but it is complicated by the fact 1) the co-host has incurred expenses which he first needs to deduct, and 2) he has the relationship with the two charities and would like them to receive the funds from himself. Failing a direct transfer to the charities, how do I cover our CIC in terms of paperwork?

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By Cheshire
05th Feb 2017 23:15

(Just my rambling thoughts....)Thinking that the tickets sales are likely to be considered as the CIC just exercising its trade and therefore subject to CT, so it might be better to get all expenses (including from the co-host) to reduce at least that element. Plus from a regulatory point of view the donations going direct to the charities rather than a (presumably self employed?) entertainer will fit the bill better and of course ensure the charities get their wedge. That said - Im not well versed on CICs so will leave it to the more capable.

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By dgilfillan
05th Feb 2017 23:40

I sincerely hope not else 20% will go on CT! from reading the below we had hoped we could just make a gift ourselves and CT is calculated on profits after the donation?

http://www.institute-of-fundraising.org.uk/guidance/fundraising-essentia...

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Scalloway Castle
By scalloway
06th Feb 2017 09:22

If you donate the profit from the event to a charity the payment will be deducted from your taxable profits.

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By dgilfillan
06th Feb 2017 11:33

And what are the paperwork requirements 1) giving profits directly and 2) giving profits via 3rd party?

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Scalloway Castle
By scalloway
06th Feb 2017 13:37

1) Get a receipt from the charity with all the details noted on it.

2) Get a lawyer to draw up an agreement between the three parties.

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By dgilfillan
06th Feb 2017 15:03

Thanks.

The sums don't really justify getting a lawyer involved at this stage. (They would just consume all the profits) obviously it the arrangement is repeated or the sums grow I will be sure to do so. But at his stage would anything else suffice?

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By dgilfillan
07th Feb 2017 12:36

What paperwork would suffice from the 3rd party? Some kind of eveidence or statement to the effect he is giving the proceeds to charity???

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By Cheshire
07th Feb 2017 13:08

Call me a cynic but having seen a million and one frauds in my previous roles, are you really happy to transfer the sum to a third party? (how does this sit with your CIC regs and duty of care etc)

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Scalloway Castle
By scalloway
07th Feb 2017 21:23

Cheshire makes a very valid point. I would expect as a minimum that the third party would give you a receipt from the charity.

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By Ruddles
07th Feb 2017 21:34

I'd be very careful here. HMRC have been known to disallow donations that are not given directly to the charity.

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