Summary
This is an association of individuals that is registered with the Charity Commission. The trustees are elected by the membership at the AGM.
Accounting regulations
Must prepare accounts in accordance with:
- FRS102 (section 1A if applicable)
- Charities SORP (FRS102)
Receipts and payments accounts are permitted.
Tax implications
- Exempt from corporation tax on charitable trading, capital gains, and investment income
- Mandatory Rates Relief (80% business rates reduction)
- Charitable VAT exemptions and zero-rating reliefs apply
- Does not normally need to file a corporation tax return
Advantages
- Non-profit aim is its main objective, and aims should be consistent with charity law
- SITR may be available on loan stock issued (though this cannot be advertised – see below)
- VAT, Business Rates and Corporation Tax: see above
- Grant funders look favourably on charitable registration
- Easy and cheap to set up
Disadvantages
- No limited liability
- Any contracts have to be made with named trustees
- Any assets or liabilities have to be held by named trustees
- The Financial Services and Markets Act 2000 applies, so cannot advertise for loan investment from the public
- Must be audited if income is over £1m (£500k in Scotland)
- Needs an Independent Examination if income is over £25k – by a qualified accountant if income is over £250k
- Preparation of accounts and trustees annual report is more complex, time consuming and expensive than for non-charities, due to the application of the Charities SORP.
Services required
- Accounts preparation
- iXBRL tagging of accounts and submission to HMRC with Corporation Tax return CT600
- Possible submission of Corporation Tax return CT600 with charity pages CT600E
- Payroll (if employing people)
- VAT advice, if necessary
- Book-keeping, if required
- Independent examination or audit, as necessary