Tax planning for charities

Tax planning and tax advice for charities

Tax and VAT regulations and compliance can be a minefield for charities and not for profit organisations. Any mistakes made can be incredibly costly and can result in trustees being personally liable. There are so many areas where tax problems arise in the charity sector and stories of things going wrong are commonplace.

The great news is that Harry Nicolaou are specialist tax and VAT advisors for charities that means that our team know the legislation inside and out. They know what works, what does not and of course what to avoid like the plague. They will keep you on the right side of the law, and that means paying the correct amount of tax and VAT.

Expert Tax Advice for your Charity

There are lots of accountants that say they understand tax; few offer specialist tax and VAT planning for charities. Tax and VAT for charities is a highly complex area, so much so that often even the authorities are unaware of the application of specific reliefs, leading to charities being taxed by default.

If you require advice on a specific issue then we can help. You may also choose us to undertake a taxation and VAT review and health check to ensure you are paying the correct amount of tax and VAT.

3 Common Charity Tax areas for discussion VAT, Gift Aid and Income Tax

Income tax and corporation tax for charities

As with all areas of charitable legislation there are certain conditions that must be met. If these are met then many of the activities of charities are exempt from both income and corporation tax. Care must be taken to ensure that correct legal structures are in place, managed, procedures followed and where necessary tax planning undertaken. For example, it is common for charities not to be aware of the income generation activities that are taxable. Or that some of the income generation activities may fall outside the scope or objectives of the charity. Failure to do so can result in unnecessary tax being paid or falling foul of legislation.

Value added tax for charities

VAT is complex enough for businesses but for charities it can be a minefield. Fortunately at Harry Nicolaou we have a great understanding of the classification of income sources for VAT and how this impacts your charitable VAT position. In fact its one area we have made regular savings for our clients. There are also VAT exemptions and reliefs available that charities and not for profit organisations can claim, and planning that can be undertaken but many do not know how or what they are.

Other complex VAT issues that arise can be over suppliers incorrectly charging VAT and liability of income. Often when our team carry out a review with a new customer we find that suppliers have been charging VAT on their sales and services when they should not have been. By identifying these overcharges we can help you to recover this money. VAT liability due on donations and grants is yet another common area that can cause so many headaches. By working with Harry Nicolaou specialist charity accountants we can help your charity or not for profit organisation keep the right side of the law whilst paying the correct amount of tax.

Gift Aid a double-edged sword

Gift Aid can be a blessing whilst presenting charities with what can end up being a double-edged sword.

In our experience, many charities and not for profit organisations fail to claim the full amount of relief that is legally available to them. On the other edge of the sword, HMRC’s audit team often try to claim large reclaims against charities where paperwork has not been fully completed.

If you’re not very careful, you can find yourself losing out on both sides. The good news is Harry Nicolaou is highly experienced in implementing and improving systems that ensure your charity will not lose out. And if you are ever unfortunate enough to be faced with a demand from the HMRC for a gift aid claim, we can help defend your claim and legally limit the damage.