Specialists in the charity, social enterprise and non-profit sectors
Resources
Structures
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An unincorporated association is a group of people who get together for a common purpose. The organisation may have a set of rules or constitution, but it has no separate legal status. Often campaign groups, sports groups and membership clubs are run as unincorporated associations. It cannot sue or be sued and cannot own property. The people involved remain fully liable for the actions of the organisation.
What are the filing requirements?
None. Accounts may need to be prepared if the constitution demands this, but if so the accounts are only for the members, unless a corporation tax return is required.
What are the tax implications?
Must register for VAT if making taxable supplies over the threshold.
Should register for corporation tax and file corporation tax returns, although in many cases HMRC will agree that no taxable activity is taking place and so returns need not be filed.
Can operate a payroll.
Slade & Cooper services
We advise a number of unincorporated associations.
We can help to have the organisation’s tax record made dormant, by getting HMRC to agree that taxable activity is insignificant.
We can advise on VAT which can be a complex area for many clubs.
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A charitable trust is a trust that is registered as a charity by the Charity Commission. The constitution of the trust is the trust deed, which must set out the charitable aims. The trust cannot own property so individual trustees have to be named as custodian trustees of any land. The trustees remain fully liable for the actions of the charity.
What are the accounting and filing requirements?
Accounts need to comply with the Charities Act 2011, the Charities SORP and the FRSSE.
Accounts and Annual return need to be filed at the Charity Commission within 10 months of the year end.
What are the tax implications?
Must register for VAT if making taxable supplies over the threshold.
Some purchases by charities attract zero rating relief, and some supplies by charities can be exempt from VAT
Must file a corporation tax return if requested to do so by HMRC. Most charity income is exempt from corporation tax, or is non-business in nature and therefore not taxable.
Slade & Cooper services
Preparation of accounts and independent examination
Audit if over the threshold (currently £1m income for years ended 31 March 2015 and after)
VAT advice so you know when registration might be necessary, and can take advantage of zero rating and exemption reliefs.
Charity Corporation tax returns
Payroll bureau
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A charitable company is normally a company limited by guarantee that is registered as a charity by the Charity Commission. The constitution of the charity is its memorandum and articles of association, which must set out the charitable aims. The charity can own property so individual trustees do not need to be named as custodian trustees. The trustees have limited liability for the actions of the charity.
What are the accounting and filing requirements?
Accounts need to comply with the Companies Act 2006, the Charities SORP and the FRSSE.
Accounts and Annual Return need to be filed at the Charity Commission within 10 months of the year end, and with Companies House within 9 months of the year end. Also needs to complete an Annual Return for Companies House.
What are the tax implications?
Must register for VAT if making taxable supplies over the threshold.
Some purchases by charities attract zero rating relief, and some supplies by charities can be exempt from VAT
Must file a corporation tax return if requested to do so by HMRC. Most charity income is exempt from corporation tax, or is non-business in nature and therefore not taxable.
Slade & Cooper services
Preparation of accounts and independent examination
Audit if over the threshold (currently £1m income for years ended 31 March 2015 and after)
VAT advice so you know when registration might be necessary, and can take advantage of zero rating and exemption reliefs.
Charity Corporation tax returns
Payroll bureau
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A charitable incorporated organisation (CIO) has been available in England and Wales since January 2013. It is not a company but is registered by the Charity Commission. The CIO can own property so individual trustees do not need to be named as custodian trustees. The trustees have limited liability for the actions of the charity.
What are the accounting and filing requirements?
Accounts need to comply with the Charities Act 2011, the Charities SORP and the FRSSE.
Accounts and Annual Return need to be filed at the Charity Commission within 10 months of the year end.
What are the tax implications?
Must register for VAT if making taxable supplies over the threshold.
Some purchases by charities attract zero rating relief, and some supplies by charities can be exempt from VAT
Must file a corporation tax return if requested to do so by HMRC. Most charity income is exempt from corporation tax, or is non-business in nature and therefore not taxable.
Slade & Cooper services
Preparation of accounts and independent examination
Audit if over the threshold (currently £1m income for years ended 31 March 2015 and after)
VAT advice so you know when registration might be necessary, and can take advantage of zero rating and exemption reliefs.
Charity Corporation tax returns
Payroll bureau
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A company limited by guarantee (CLG) is a company that does not have any shares, and is therefore unable to make a distribution of its profit to its members. It is a legal person and so can own property, sue and be sued. The directors and members have limited liability for the actions of the company. Some CLGs are charitable companies. A CLG structure is commonly used by social enterprises that are not charities (as well as by charities), since many social enterprises are “not for profit” and a CLG cannot pay dividends.
What are the accounting and filing requirements?
Accounts need to comply with the Companies Act 2006 and the FRSSE.
Accounts need to be filed at Companies House within 9 months of the year end. Also needs to complete an Annual return for Companies House.
What are the tax implications?
Must register for VAT if making taxable supplies over the threshold.
Must file a corporation tax return. If the activity of the CLG is non-business and philanthropic then it may be possible to get HMRC to make the corporation tax record dormant, so that returns do not need to be filed.
Slade & Cooper services
Preparation of accounts and accountant’s report
VAT advice so you know when registration might be necessary, and can deal with any partial exemption and outside the scope issues.
Corporation tax returns and iXBRL tagging of the accounts
Payroll bureau
If taxable activity is insignificant we can help to have the organisation’s tax record made dormant.
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A Community Interest Company (CIC) is a company that has an asset lock, so that its assets cannot be distributed to its members in the event of a winding up. There are also legal limits to the amount of profit that can be paid as dividend. It is a limited liability company, and can be limited either by shares or by guarantee. A CIC structure is commonly used by social enterprises that are not charities, as the asset lock makes funders more confident that the funds will be used for the proper purpose for which they were intended. Also, the CIC’s ability to pay dividends is limited (or non-existent, if limited by guarantee), which sits well with the ethos of social enterprises.
What are the accounting and filing requirements?
Accounts need to comply with the Companies Act 2006 and the FRSSE.
Accounts need to be filed at Companies House within 9 months of the year end.
An Annual Return needs to be filed with Companies House.
A CIC report must be filed at the same time as the accounts, setting out how the CIC has benefitted the community, among other things.
What are the tax implications?
Must register for VAT if making taxable supplies over the threshold.
Must file a corporation tax return. If the activity of the CIC is non-business and philanthropic then it may be possible to get HMRC to make the corporation tax record dormant, so that returns do not need to be filed.
Slade & Cooper services
Preparation of accounts and accountant’s report
VAT advice so you know when registration might be necessary, and can deal with any partial exemption and outside the scope issues.
Corporation tax returns and iXBRL tagging of the accounts
Payroll bureau
If taxable activity is insignificant we can help to have the organisation’s tax record made dormant.
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A Community Benefit Society (CBS, also known as Society for the Benefit of the Community or Bencom) is a registered society that has an asset lock, so that its assets cannot be distributed to its members in the event of a winding up, and surpluses cannot be paid to members by way of a dividend. It has limited liability. A CBS is controlled democractically by its members on a one member, one vote basis, even if some members have more shares than others. It is recognised as a form of co-operative by Co-operatives UK.
Social investment
Unlike other structures, registered societies including CBSs are exempt from the Financial Services and Markets Act 2000, which means they are able to seek social investment direct from the public in the form of loan stock or shares.
What are the accounting and filing requirements?
Accounts need only comply with the FRSSE.
Accounts need to be filed with the Financial Conduct Authority within 7 months of the year end, together with form AR30.
What are the tax implications?
Must register for VAT if making taxable supplies over the threshold.
Must file a corporation tax return. If the activity of the CBS is non-business and philanthropic then it may be possible to get HMRC to make the corporation tax record dormant, so that returns do not need to be filed.
If a registered society pays interest to a creditor or member who is an individual, it need not deduct tax, but must make a return of interest paid within 3 months of its year end (S887 Income Tax Act 2007).
Slade & Cooper services
Preparation of accounts and accountant’s report or audit exemption report
VAT advice so you know when registration might be necessary, and can deal with any partial exemption and outside the scope issues.
Corporation tax returns and iXBRL tagging of the accounts
Payroll bureau
If taxable activity is insignificant we can help to have the organisation’s tax record made dormant.
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A Co-operative Society (CS) is a registered society that is able to distribute its surpluses to its members. The members may be its customers (a consumer co-operative) or its staff (a worker co-operative), or any other defined stakeholder group. It has limited liability. A CS is controlled democratically by its members on a one member, one vote basis, even if some members have more shares than others.
Social investment
Unlike other structures, registered societies including CSs are exempt from the Financial Services and Markets Act 2000, which means they are able to seek social investment direct from the public in the form of loan stock or shares.
What are the accounting and filing requirements?
Accounts need only comply with the FRSSE.
Accounts need to be filed with the Financial Conduct Authority within 7 months of the year end, together with form AR30.
What are the tax implications?
Must register for VAT if making taxable supplies over the threshold.
Must file a corporation tax return.
If a registered society pays interest to a creditor or member who is an individual, it need not deduct tax, but must make a return of interest paid within 3 months of its year end (S887 Income Tax Act 2007).
Slade & Cooper services
Preparation of accounts and accountant’s report or audit exemption report
VAT advice so you know when registration might be necessary, and can deal with any partial exemption and outside the scope issues.
Corporation tax returns and iXBRL tagging of the accounts
Payroll bureau
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A Charitable Society is a Community Benefit Society that has been granted exempt charity status by HMRC. This means that HMRC recognises that the society is charitable and so the charity tax exemptions apply, but it is not registered with the Charity Commission. A charitable society can be a body with a wide membership (such as its charitable beneficiaries) but it cannot distribute surpluses to its members.
Social investment
Unlike other structures, registered societies including CSs are exempt from the Financial Services and Markets Act 2000, which means they are able to seek social investment direct from the public in the form of loan stock or shares. However, HMRC will need to be sure that there are strict limits on the interest payable to investors if the society is to retain its charitable status.
What are the accounting and filing requirements?
Accounts need to comply with the FRSSE and the Charity SORP.
Accounts need to be filed with the Financial Conduct Authority within 7 months of the year end, together with form AR30.
What are the tax implications?
Must register for VAT if making taxable supplies over the threshold.
Must file a corporation tax return only of requested to do so by HMRC.
If a charitable society pays interest to a creditor or member who is an individual, it need not deduct tax, but must make a return of interest paid within 3 months of its year end (S887 Income Tax Act 2007).
Slade & Cooper services
Preparation of accounts and accountant’s report or audit exemption report
Audit if income exceeds the threshold of £250,000
VAT advice so you know when VAT registration might be necessary, and can deal with any partial exemption and outside the scope issues.
Corporation tax returns when requested to file by HMRC.
Payroll bureau
Regulatory Bodies
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All charities need to register with the Charity Commission unless they are exempt; charitable societies are exempt. The Charity Commission gives guidance on model rules and governance issues, and keeps a searchable register. Charities must file accounts and annual returns with the commission within 10 months of their year end. The commission does not fine charities for late returns, but does name and shame them!
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This is the regulatory body for UK companies. All companies, charitable or otherwise, must file accounts at Companies House within 9 months of their year-end (6 months in the case of a plc), and if they do not do so then automatic penalties come into play. Companies House keeps a searchable register and also keeps a register of directors of companies. Companies need to inform Companies House of any changes in directors’ details within 30 days, and should also complete an annual return.
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This is the regulatory body for the financial services industry, but for historical reasons it also regulates registered societies such as Community Benefit and Co-operative Societies. Registered societies must file annual returns with the FCA within 7 months of their year end, together with their annual accounts. The FCA can fine societies for late submission, but this is not automatic. The FCA keeps a searchable register of societies.
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This is the body that regulates Registered Social Housing Providers (RSHPs). All RSHPs need to file their annual accounts with the HCA within 6 months of their year end. If the RSHP has been audited, then it also needs to send the HCA the management letter provided by the auditors, which advises on any deficiencies in internal controls. The HCA keeps a public list of RSHPs.
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HMRC has multiple regulatory functions. The areas in which Slade & Cooper is commonly involved in advising our clients include:
VAT returns and Corporation Tax returns
Self-assessment returns
exempt charity status for registered societies
Gift Aid returns
Returns of interest paid gross by registered societies
CT61 returns of interest paid net by companies
Tax
Charities and social enterprises have specific tax issues:
Charities and corporation tax
Although generally exempt from a charge on most of their income, there are a number of corporation tax pitfalls that charities need to look out for.
VAT
There is no general VAT exemption for charities, but much of their activities and income are either exempt from VAT or outside the scope of VAT. Also, there are a number of zero-rating reliefs that apply to charities.
Non-charity social enterprises often also have income that can be exempt or outside the scope, and both charities and non-charities can therefore have to deal with partial exemption.
Gift Aid
How charities can claim tax refunds for their donations.
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What are charity corporation tax exemptions?
Charities do not enjoy a blanket exemption from tax. Certain specific types of income are exempted from corporation tax subject to the condition that income is applied to charitable purposes, principally:
Investment income
Capital Gains
Income from land
Income from fund-raising events
Trading which satisfies the primary purpose of the charity
Trading carried out by the beneficiaries of the charity
Non-primary purpose trading income which is under £50,000 and under 25% of the Charity’s total income; trading income under £5,000 is exempt in any case
In addition, some charity income and activities (eg philanthropic activities paid for by donations) are simply not taxable.
How can a charity come within the charge to corporation tax?
There are several ways in which a charity can end up having to pay tax. The most common ones we come across are:
Non-primary purpose trading exceeds the limits described above;
The charity makes non-charitable expenditure, which can include lending to a non-charitable organisation such as a trading subsidiary;
The charity breaches the substantial donor rules.
How Slade & Cooper can help with charity corporation tax
If we prepare your accounts and do your audit or independent examination then as part of that work we will review whether or not there is any likelihood that the charity will come within the charge to corporation tax, and we will advise you accordingly.
Slade & Cooper can also prepare and file the corporation tax return CT600, including the charity supplementary pages CT600E. This is only required if HMRC have requested it or requested it or if the charity has a tax liability to declare.
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Do charities need to register for VAT?
If a charity’s taxable supplies exceed the VAT registration threshold then the charity must register for VAT. A charity is no different from any other entity in this respect, except that often most of a charity’s activities are exempt from VAT, or outside the scope of VAT, and therefore do not count towards the threshold.
What special VAT provisions apply to charities?
Many types of sales are exempt when made by a charity (or other eligible body). The most important of these are:
Education and training
Health and welfare
Sport and recreation
Cultural services
Fundraising events
In addition, a number of zero rating (or reduced rating) reliefs apply to expenditure by charities, for example:
Power
Property
Disabled aids
The operation of these provisions is often highly complex.
Other VAT issues commonly encountered by charities and social enterprises
As well as the specific provisions, examples of which are listed above, charities and social enterprises often encounter a number of other complex VAT issues.
Subscriptions – the VAT treatment depends broadly on what is being supplied, and will differ in each case
Grants and donations – these are generally outside the scope of VAT, but it is not always clear what is a grant and what is a payment in return for services, which might attract VAT (or be exempt). To determine the VAT treatment, it is necessary to look at the detail of the agreement and at what is actually being provided.
Partial exemption – where an organisation has some taxable supplies and some exempt supplies, then it needs to allocate its overhead VAT between the taxable and exempt supplies.
How Slade & Cooper can help
If we prepare your accounts and do your audit or independent examination then as part of that work we may review whether or not there is any likelihood that the organisation will have to compulsorily register for VAT. In this situation, we will advise you accordingly. If you are already VAT registered we will review any partial exemption method in place.
We can also:
Prepare VAT returns on a quarterly or annual basis
Prepare your annual partial exemption adjustment
Provide VAT consultancy on a particular issue
Provide a VAT health check