According to the Charity Commission, key hallmarks of an effective charity include having “the financial and other resources needed to deliver its purposes and mission.”
For many charities, putting in place those financial resources will include fundraising. Some charities have always had fundraising as a core activity while for others, recent cuts in public sector funding have encouraged them to develop or expand income generation activities.
As advisers experienced in working in the charities and not-for-profit sector, Haslers can provide general strategic advice on fundraising options, including:
- use of trusts and foundations
- partnerships with corporate supporters
- setting up and running appeals
- creating business plans that incorporate fundraising strategies
- monitoring and reviewing the success of fundraising strategies.
We can also advise on raising income through charity trading and the use of trading subsidiaries.
Many charities choose to operate activities that would otherwise be taxable through a trading subsidiary. The subsidiary then makes a Gift Aid donation to the charity, covering some or all of the profits, with no tax payable.
Other charities’ trading activity income may be low enough for them to qualify for the small trading tax exemption.
Elsewhere, the supply of goods and services at various fundraising events – such as fairs, exhibitions and live performances – are exempt from corporation or income tax, providing certain conditions are met, such as the frequency with which events are held.
A key way for charities to maximise the value of the cash donations they receive from UK taxpayers is to ensure these are covered by Gift Aid declarations from the donors. These enable the charity to reclaim basic rate tax on the amount donated, i.e. with Gift Aid, a £10 donation is worth £12.50 to the charity.
Under the Gift Aid Small Donations Scheme, charities can claim top-up payments from HM Revenue and Customs (HMRC) on up to £5,000 of small cash donations of less than £20, where it is difficult to collect a Gift Aid declaration, for example during a street collection.
In this environment, maximising the tax efficiency of fundraising adds further value to income generated, but the tax issues involved can be complex and challenging.
Haslers can provide expert advice on options for mitigating tax while maintaining HM Revenue & Customs compliance. For example, trading activities – selling goods or services directly related to the charitable aims and objectives – can be a popular route for fundraising but depending on the type and scale of the activities, the profits arising may be liable to tax.
Haslers can provide expert advice on all aspects of Gift Aid and its administration, including through using the Charities Online system for claiming repayments.
To find out more about Haslers’ East London and Essex-based accountancy, tax and business advisory services for charities, please contact us.