Charities and Not for Profit Organisations

Tax compliance can be a minefield for charities. Mistakes can be very costly and, under some circumstances, trustees could be personally liable.

In our experience the main areas where tax problems arise are as follows:

Gift Aid

Charities can suffer a double problem on Gift Aid. In the first place, many fail to claim the full relief available to them due to failure to identify and act upon eligible income.  On the other hand, HMRC’s audit inspections often lead to large reclaims against charities for alleged overclaims where the paperwork is not fully complete. So it is possible to lose out both ways.

We can help you with both problems.  We are experienced in implementing simple systems that do the job both ways.  And if you are unfortunate enough to be on the receiving end of a tax demand following a Gift Aid audit by HMRC, we are very experienced at defending your position and limiting the damage. 

We were recently engaged by a church that was facing a demand for £60,000 on back claims and £40,000 on current claims blocked. We worked with them and settled the whole audit for just £65 tax recovery!

VAT

In our experience, most charities pay more VAT than they need to due to the complexity of VAT law. The most common areas leading to overpayment are:

Non Business Use of Property (including leases)

If you have incurred VAT on a property or lease which you intend to use for non business purposes, we may be able to mitigate the VAT cost incurred. We have achieved savings in excess of £1m on occasions.

Suppliers Charging VAT Incorrectly

Many suppliers charge VAT on sales to charities when they should not.  We have a simple process for identifying overcharges so you can take action (with or without our help) to recover this money. We recently saved over £100k for a professional association.

Liability of Income

The VAT liability of donations and grants is a highly complex area and one which causes an awful lot of headaches. We can assist you in determining the correct liability of income streams and advise on the impact of this position.

Cultural Exemption

Some activities undertaken by a charity or not for profit organization may qualify for exemption as a cultural service. We can advise on this issue and, if appropriate, assist with any refund claims.

Corporation Tax

The third area which causes trouble is tax on trading activities. It is common for charities not to be aware that some of their income generation activities are taxable.  Furthermore, the complex rules on non-qualifying expenditure mean that charities can pay tax on both profits and losses!

Another issue which commonly arises is that the income generation activities may not be within the objects of the charity.
We can help you with all aspects of these problems, whether it be ensuring that problems do not arise in the future, or defending you from a current investigation by HMRC.

Services available from Covertax

As well as bespoke advice on the issues mentioned above, we also offer the following reviews:

• VAT Savings Review

We offer a ‘guaranteed’ VAT savings review.  We will visit your premises for a half day review focussing mainly on VAT, but also touching on other tax areas.  The price is £750 + VAT.  If we cannot indentify at least that much in tax savings, the visit is free. 

• Charity Trading Review

This review is designed to protect charities from risks associated with trading, not just from the tax point of view but also looking at the position regarding the charity’s objects and it’s risk management obligations under Charities Commission guidance.  We look for cost-effective pragmatic solutions, rather than simply rolling out a standard solution involving a subsidiary company.

Call us on 0845 643 5450 for a fixed price quote.