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Informal membership groups

Informal membership groups

I've been approached by someone running a society for book enthusiasts.

The society in question are all fans of a particular author, and the society's aim has always simply been to share their enthusiasm for that author with one another and the world in general. They have a little over 400 members who pay an annual subscription which is solely to cover the costs of producing and distributing the newsletters of the society. If the income does ever exceed the costs then this has been ploughed straight back into the society and no member is entitled to any of the funds except to cover expenses incurred on the group's behalf. They have also ocassionally received bequests, where a deceased member has asked in their will for their book collection to be sold by the society (who are more likely to get a good price due to having a ready market in their members) with the society receiving some of the proceeds. This has always been a case of the share of the proceeds being decided by the deceased rather than the society charging a fee for doing this.

They are now planning to produce a book about the works of the author, and this has raised the question of the taxability of the society. There is no intention at present of this book being a commercial venture, with the book being offered to members with a sales price pitched at a level to cover the costs of production as for the newsletters.

The whole thing has only ever been run on an informal basis but would their activities give them a liability to corporation tax? Is there any way in which the activities of the group could be considered charitable and thus exempt from tax? If not, what is the best approach here? This is not a case of anyone seeking to avoid paying tax, but simply a case that the very possibilty never occurred to them until now. The society has been running for a number of years so there is some concern about penalties arising if they should have been submitting returns historically.


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By zebaa
16th Feb 2012 23:41

No problem

There are two strands here it seems to me: membership & the publication side. In the case of the first, membership, if the club is not incorporated there is no problem. In the case of the second, this sounds to me to be mutual trading & as such I don't think there is a problem here either.

See here for more information:

Thanks (1)
17th Feb 2012 08:25

Just what I wanted

So, if I understand the linked information correctly, providing trade has only been and continues to only be with the members, then there is nothing to worry about. Presumably this would change if they decide to sell the book outside the membership, regardless of the price, but that is a bridge that can be crossed when we come to it. The main thing is that the past activities would not appear subject to tax, which was the main concern.

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By Ian Bee
17th Feb 2012 09:06


What does the society do with any surplus funds? Assuming that the annual membership income all comes in at the same time, and sales of the books are for cash, is it put on deposit? If so I think any interest arising is subject to tax. The amounts may well be small, but a return would be needed. It is probably corporation tax as the society is an uinincorporated association.

This is based on experience from many years ago so I would look forward to corrections from anyone with more up to date knowledge.

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By neileg
17th Feb 2012 09:15


Just to correct a misconception, to be tax exempt, an organisation needs to be a registered charity. Charitable aims aren't enough.

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17th Feb 2012 09:31

Sorry Neileg but that is just wrong.

It has long been established that a group cannot make a profit out of it's own members, a liability only arises if the surplus is distributed. HMRC's current interperetion of the legislation is set out in the link posted by zebaa above. Indeed ChCom will not register a charity with income under £5k.

HMRC may occasionally send a return to the organisation if they are aware of it, which should be returned nil with an explanation of the situation, they will do this whether or not the organisation is a registered charity. Bank interest received net will not be a problem.

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By neileg
17th Feb 2012 09:42


I wasn't commenting on mutual trading. Perhaps my language wasn't as clear as it might have been, but I was wanting to pointout that charitable objects aren't enough to make an organisation tax exempt. I'm happy to be corrected on HMRC's view on very small organisations, an unusally pragmatic view from them.

Cheers, Neil

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17th Feb 2012 10:09

Been involved with these clubs for years ...

both incorporated or otherwise. Write to HMRC early on with the first set of accounts and they will typically write back saying they will review it in 5 years time. They can pretty much do anything provided the funds are kept for the benefit of the members.

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17th Feb 2012 10:18

FA'10 sch 6


FA'10 sch 6, says the organisation must be for charitable purposes and have complied with the requirements to register under s.3 of the Charities Act 1993. 

The thing about small organisations is that they are not required to register under the Charities Act, so they will have complied with the terms without doing anything.

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