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Corporation tax and club accounts.

We are a small company limited by guarantee who stage music events. Become charity to avoid tax?

We are a group of volunteers acting as small company limited by guarantee. We put on music events in our area. In the past we have just about broken even and so tax has not been an issue. We have received some grants and sponsorship which I guess are treated as taxable income. Tax returns have been filed along with accounts to Companies House.

None of the group receives any payment for the work that they do. Going forward it is likely that we will make a small surplus which would be used to fund a festival next year. Am I right in saying this surplus would be treated as taxable? Can we ( legally!) avoid this?

Should we regroup as a charity or perhaps a CIO?

Many thanks in advance.

GR

 

 

 

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By stratty
22nd Nov 2017 09:47

I think you should probably speak to your accountant about this.

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to stratty
22nd Nov 2017 10:24

Hi Stratty,

If you don't wish to reply to a post because you think it's someone seeking free advice, it's probably best to just not reply at all.

But since the OP is an accountant seeking help, do you have any advice you could offer him?

FB

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to Francois Badenhorst
22nd Nov 2017 10:38

Francois Badenhorst wrote:

If you don't wish to reply to a post because you think it's someone seeking free advice, it's probably best to just not reply at all.

But since the OP is an accountant seeking help, do you have any advice you could offer him?

FB

Is this official Sift policy now, that this is a general advice forum for anyone too cheap to pay for advice? Because plenty of people come on here claiming to be accountants but that clearly don't have a clue what they are doing.

As well as the site redesign, the influx of freeloaders has been one of the biggest complaints of users in recent months. If it is now Sift policy that we can't even suggest that questioners speak to an accountant, then this place has truly given up on its stated purpose once and for all.

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to Francois Badenhorst
22nd Nov 2017 13:37

Francois Badenhorst wrote:

Hi Stratty,

If you don't wish to reply to a post because you think it's someone seeking free advice, it's probably best to just not reply at all.

But since the OP is an accountant seeking help, do you have any advice you could offer him?

FB

Then your website blurb needs to be updated.

"AccountingWEB.co.uk is the largest independent online community for accounting and finance professionals in the UK - providing award-winning content and online engagement between members in a true community environment.

Accountants in Practice represent just under half of our visitors and we reach 75% of firms outside of the top 20.

Accountants in Business represent the remainder of our audience, typically working in smaller to mid-tier businesses."

Not true, is it?

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By mrme89
to Francois Badenhorst
22nd Nov 2017 15:14

I've read this three times now and I am still not quite sure if you are taking the p1ss or not, Francois.

If Sift are now turning Accounting Web into a place where people too cheap to pay for an accountant come, do Sift intend to start paying its 'valued' contributors?

If this is now the stance, Sift really ought to update the about us page and anticipate some of their 'valued members' leaving permanently.

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22nd Nov 2017 10:13

I'm sorry but I find your reply unhelpful.
I am an accountant but this is not my area of expertise.
We are all a group of volunteers who give up our time for free to provide our community with a great resource. I have recently been asked to help out. Being an accountant I can find my way around the bookkeeping very easily whilst others have struggled. I am happy to help others out where I can. Giving a bit of free time and assistance to help others around you helps make this world a better place. I happily act as treasurer for local clubs and societies and would never tell them to go the the accountant on the high street.
Yes, I know I am asking for free advice. I am aware that this is how you earn your money so perhaps I am being crass. I'm sorry if you think I am a freeloader.
All I am hoping for is a small bit of input to help us keep the small surplus that we have worked hard to gain so that we can put on a better show next year.

Thanks (4)
to Greenroof
22nd Nov 2017 10:23

You're absolutely within your rights to ask. I'm sure you'll get another reply soon! :)

Thanks (2)
to Greenroof
22nd Nov 2017 10:32

Greenroof wrote:
Yes, I know I am asking for free advice. I am aware that this is how you earn your money so perhaps I am being crass. I'm sorry if you think I am a freeloader.
You are asking for valuable advice for free. So it isn't that people think you are a freeloader. You are a freeloader. Painting yourself as some sort of noble soul giving freely of themselves does not change that. In fact, it comes across as a blatant attempt to guilt people into giving you free advice, which is not a nice thing to do.

You are putting on music events, and are presumably charging for entrance to those events. That sounds like a trading business to me. Grants and sponsorship that support a trading business are generally taxable. So you will have a taxable profit. The fact that you would rather not pay tax on this profit is irrelevant.

You suggest becoming a charity as if just declaring yourself a charity would be a formality. How would your organisation work to meet the requirement to have charitable aims?

Either come up with more legitimate costs or pay the tax.

Thanks (3)
to Greenroof
23rd Nov 2017 18:04

Greenroof wrote:

I'm sorry but I find your reply unhelpful.
I am an accountant but this is not my area of expertise.
We are all a group of volunteers who give up our time for free to provide our community with a great resource. I have recently been asked to help out. Being an accountant I can find my way around the bookkeeping very easily whilst others have struggled. I am happy to help others out where I can. Giving a bit of free time and assistance to help others around you helps make this world a better place. I happily act as treasurer for local clubs and societies and would never tell them to go the the accountant on the high street.
Yes, I know I am asking for free advice. I am aware that this is how you earn your money so perhaps I am being crass. I'm sorry if you think I am a freeloader.
All I am hoping for is a small bit of input to help us keep the small surplus that we have worked hard to gain so that we can put on a better show next year.

I actually think you need to speak to a lawyer about this.

What evidence do you have that your purposes are charitable ?

More to the point, how much irrecoverable tax do you expect to save and how does that compare to the cost of setting up the charity ?

You may well find that the charity is a waste of time and money.

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22nd Nov 2017 10:33
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22nd Nov 2017 10:36

You should first check whether your activities meet the charity commission's criteria for becoming a registered charity. Many folks think their activities can automatically be classed as 'charitable' because they have a social purpose or are undertaken at little cost.
Otherwise, just pay the corporation tax.

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By Tosie
22nd Nov 2017 11:05

I would look at CIC.
However if you make a profit one year then use that profit to provide entertainment the following year it could be just a cash flow issue. Profit year 1 loss year 2 carry back.

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22nd Nov 2017 13:48

Organizing music events is a business, many people make a living from it.

Charity? You could try and squeeze in as arts or education but where is the public benefit?

A CIC pays tax like any other company, there is no point whatsoever in a CIC unless you are dealing with the public sector and they demand it.

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23rd Nov 2017 17:04

You have to go through many hoops to be a charity it is not easy our carnival club failed as although we gave away all the money raised it was not thought to be charitable by the charity commissioners. HMRC did however say it was not interested if we did not make more than £500 (I think, it was some years ago). We ended up as a company limited by guarantee

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