[cma-l] Charitable Status
Two Lochs Radio
tlr at gairloch.co.uk
Tue Feb 8 13:14:48 GMT 2011
Just a quick follow-up. Of course what Jaqui says re the facts of VAT registration is correct, and as long as you can demonstrate to HMRC that you are or will be carrying out *any* business activity (even if the bulk of your activity is non-business), then you can elect to register for VAT, and HMRC cannot refuse you.
Where I would differ slightly is from the opinion that "it really is not worth the hassle of the extra accounting unless you are quite close to the threshold."
For a station in an ongoing routine trading position, revenue-in, revenue-out, that might be the case (or might not if they are grant-funded but have a lot of VAT expenditure). But for a station in the start-up phase when there is typically a lot of money outside the scope of VAT coming in (grants, donations, fundraising etc), but a lot of VAT going out (buying transmiters, equipment, services etc), then I would suggest it is almost certain to be worth the (very limited) extra accounting work for what is effectively a 17.7% discount on all VATable outgoings.
We were a net recipient of around £10,000 VAT in our first 18 months, and could have chosen to de-register at that point and waved the VATman thanks and goodbye. That's quite proper and legal.
Bear in mind that for equiment of lasting value (not for services) you can reclaim the VAT on expenditure prior to registration as well. It has to be for items you still have and that are of continuing value (eg studio equipment) and it is rare to go back more than 3 years, but it can be done. A reasonable approach to claiming back pre-reg VAT is to apply a similar principle as straight-line deprececiation - claim the full VAT on things bought in the last year, two-thirds of the VAT for stuff from the previous year, and one-third for stuff bought up to three years prior. As long as it is for durable items that you have the VAT invoices for there should be no problem. We had no problem with it.
As it happens we stayed registered after set up, even though we are well below the threshold. In some quarters we are net gainers, but mostly we have to make a small payments of VAT - but this is not a loss as such - we are only handing over VAT received from customers. Also we have found occasionally it's useful to be registered for VAt because trade suppliers, discount warhouses, councils and agencies regard having a VAT number as evidence that you are running a bona-fide busines.
The only real downside to VAT is if the bulk of your supplies are to non-registered people who can't claim back the VAT, since that effectively raises your prices 20% for them. However if most of your business sales are, for example, to local businesses, the council, charity advertising etc, then your customers can most probably reclaim the VAT and it will make no difference to them.
Jaqui is right that partial exemption is a minefield. It is not something you would want to get into if there's an easier way, and is unlikely to be of huge benefit. HMRC's internal guidance to officers is that it should be used only where there is no other sensible course, and that it has to be set up and calculated very carefully - a lot of work. Bottom line: stay away from it.
However, that does not preclude ad hoc exemption of specific occasional activities as long as you keep a proper record of them. Most typically if you are running a fundraiser event and don't want to charge VAT on the entrance tickets or sales at the event, you can elect to declare that specific event an non-business activity outside the scope of VAT, and as long as you don't try to claim back the VAT for anything bought for it (eg prizes, posters, what have you) then you don't have to charge VAT on the income either.
Alex
----- Original Message -----
From: jaqui devereux
To: Ian Hickling
Cc: cma-l
Sent: Tuesday, February 08, 2011 10:25 AM
Subject: Re: [cma-l] Charitable Status
Dear all
Just as a point of clarification re VAT registration:
It makes no difference at all whether you are a CLG, CIC, charity or charitable company. If the sources of your income fall within the scope of VAT, and the total of those sources in scope exceed the VAT threshold, currently £70,000, then you MUST register for VAT. Whether income is within the scope depends on its nature. So an out and out grant will not be, a service level agreement may or may not be (even if for education/training) depending on the wording and whether the funding body treats it as within the scope, ads and sponsorship etc almost certainly will be. Any of the above organisation types can register voluntarily for VAT but it really is not worth the extra accounting hassle unless you are quite close to the threshold (look on the HMRC website for the rules on VAT partial exemption calculations requirements). Partial exemption is a minefield!
Hope that helps
Jaqui
On 5 February 2011 18:57, Ian Hickling <transplanfm at hotmail.com> wrote:
As I have said many times - the obvious solution is to run three businesses concurrently:
1 - The Community Radio station as a CIC which does not return a profit.
2 - A Charitable arm which can accept charitable donations which does not retrun a profit and feeds the station.
3 - A commercial limited company which can return a profit from a wide range of activities, is VAT-registered and feeds the station.
It's sensible business practice - not rocket science.
To lose that much VAT by default is just plain stupid - sorry!
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From: office at ccr-fm.co.uk
To: info at a-bc.co.uk; cma-l at commedia.org.uk
Date: Sat, 5 Feb 2011 14:34:48 +0000
Subject: Re: [cma-l] charity status
Glyn n’ all
Thanks Glyn …………. As I said …. It looks like everyone is fumbling around in the dark. Either we can as a fraturnity / brotherhood or we can’t …….. which is it …. ?? I dunno’?
Regards
Nick
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From: glyn.m.roylance at googlemail.com [mailto:glyn.m.roylance at googlemail.com] On Behalf Of Associated Broadcast Consultants
Sent: 04 February 2011 22:59
To: Office - ccr-fm
Cc: CMA-L
Subject: Re: [cma-l] charity status
Yes we had the same experience. Essentially we discovered that a community radio station could not be a charity unless it fulfilled one of a number of narrow categories . ie: if we decided to be a religious radio station then bingo, but we did not want to go that way.
Instead we went down the CIC route. It was "sold" to us as being equivalent to being a charity, but from a recent approach from Inland Revenue I think it might have some drawbacks compared to being a charity (they seem to treat us like any other ommercial Ltd company) - but I'm not an expert.
Glyn Roylance
GLOSS FM.org
On 4 February 2011 18:16, Office - ccr-fm <office at ccr-fm.co.uk> wrote:
Dear All
Just a quick enquiry ………………. Does anyone know how many Community Radio Stations in our fraturnity/brotherhood are actually charities ?? I know that we looked into it 7 years ago but the process was a complete nightmare. Also, in 2004 I clearly remember that the Charities commision simply had NO category for radio ….. it was almost as if they didn’t understand it >?>? I think the key to it and the crux of the matter was that we were technically ‘’all over the place’’ in what we were providing ……… in otherwords, providing a lot, but nothing specific ! almost ‘’a jack of all trades but master of none’’
Have any of you guys had a similar experience ? I seem to recall that there is a station on the south coast as a charity ?? plus Regen (near to us) in South Manchester who do run Wythenshawe FM and ALL FM ……………… outside of that, I’m a bit clueless to be honest ……. Any ideas ?
What about Sheffield and of course the CMA ?
Many thanks
Regards
Nick
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Jaqui Devereux
Director, Community Media Association
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