Author Topic: Why may our assosciation have to become a charity  (Read 2898 times)

kt.

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Why may our assosciation have to become a charity
« on: June 02, 2010, 04:42:23 »
Our association has always been a non profit organisation so to speak with all profits going back into the shop and nursery,  run by volunteers.  Now we have been told we are now making too much money and may have to become a registered charity?  We have self funded the majority of our site works with not many if any big jobs left to do.

Why and what does this mean exactly and what are the long term implications for our nursery and shop?
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Unwashed

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Re: Why may our assosciation have to become a charity
« Reply #1 on: June 02, 2010, 10:23:41 »
Who has told you, and why?

I'm assuming it's a question of tax liability.  Off the top of my head non-charities can make £150 profit before they pay tax [Ed: it's £100], charities several thousand.  If it is a question of tax then you probably need to talk to an accountant to see that you're offsetting all of your costs against income because it might turn out that you're not turning a profit anyway.  There's a guide somewhere on the HMRC web site, I'll see if I can't dig it out later if no one else does.

Ed:  This is the place to start on the HMRC site: http://www.hmrc.gov.uk/ct/clubs-charities-agents/clubs.htm
« Last Edit: June 02, 2010, 10:26:28 by Unwashed »
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Trevor_D

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Re: Why may our assosciation have to become a charity
« Reply #2 on: June 02, 2010, 12:39:13 »
I'd want to know "who" and "why" as well.

I don't see that you're making a profit if it's being ploughed back. Surely "profit" means dividends for share-holders, or the like. If it's being put into a contigency fund to finance the next round of improvements, it hardly counts as profit.

The idea of becoming a registered charity is to increase revenue: all tax-payers can offset their annual rent against tax and the tax-man donates it to the society. I've been involved once with a registered charity - an amateur opera company I worked with - and I know it involved the Treasurer & Secretary with quite a bit of extra work. It also meant that those of us on the Committee were personally responsible for the finances and if things went seriously wrong we would have had to foot the bill personally. I would look long and hard at the implications if I were you, and take legal advice if necessary.

Digeroo

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Re: Why may our assosciation have to become a charity
« Reply #3 on: June 02, 2010, 12:53:04 »
Profit does not mean the amount returned to shareholders but it is unlikely you are making much of a profit.  After all profit is not your income and you can offset all your cost against it before declaring and income, since you spend all your income on cost there will not be any profit.  I assume if you have any space money you soon find something that needs money spent on it.  The problem may be that some money is considered as capital expenditure rather than for example repairs and maintainence.

It may be that as a registered charity to can get money for memberships and donations accepted for gift aid and hence get some money from the government.   

I think that the members of the committee are responsible for the finances whether you are a charity or not.   You may be more liable if you should have registered as a chiarity and did not do so.

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Re: Why may our assosciation have to become a charity
« Reply #4 on: June 02, 2010, 13:05:29 »
Who has told you, and why?

I'm assuming it's a question of tax liability.  Off the top of my head non-charities can make £150 profit before they pay tax [Ed: it's £100], charities several thousand.  If it is a question of tax then you probably need to talk to an accountant to see that you're offsetting all of your costs against income because it might turn out that you're not turning a profit anyway.  There's a guide somewhere on the HMRC web site, I'll see if I can't dig it out later if no one else does.

Ed:  This is the place to start on the HMRC site: http://www.hmrc.gov.uk/ct/clubs-charities-agents/clubs.htm

The HMRC will treat an unincorporated association as dormant if the expected Corporation Tax liability (NOT the profit) is less than £100, profit would be much higher to give a liability of £100. Being dormant means no tax returns or liability. If you make a profit that gives you a CT liability more than £100 you can still carry on as unincorporated but youll pay CT on the profit. Like unwashes says you need advice to see if youve claimed everything you should. Becoming a charity is a whole other can of worms, you should think hard before you go down that route. Its onerous.

Unwashed

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Re: Why may our assosciation have to become a charity
« Reply #5 on: June 02, 2010, 13:28:37 »
Thanks weequinie, you're right.
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kt.

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Re: Why may our assosciation have to become a charity
« Reply #6 on: June 02, 2010, 14:40:17 »
The person who informed us is a neighbourhood liaison person who works for the council. She has been very helpful in assisting us in getting grants over the years and has always looked out for us and fought our corner where needed.  Apparently it is because of our  'turn-over'.  (Guess we just shouldn't be so d**n good 8) 8))

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Re: Why may our assosciation have to become a charity
« Reply #7 on: June 02, 2010, 15:03:10 »
The Charities Commission will only register a charity with income (ie turnover) over £5000 per annum. But its not compulsory for not for profits that earn more than £5000 a year to become a charity. They can carry on as they are and depending on what the PROFITS are might or might not have to pay corporation tax. Or they could become a limited company. Why is she concerned about turnover, is it only because of paying tax?

 

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