Non-trading charities 'missing out on tax breaks' says ACCA
Howard Lake | 17 October 2004 | News
Charities who do not run charity shops, fairs or bazaars and rely solely on donations are missing out on valuable tax breaks and overlooking useful opportunities to supplement their income tax-free, claims the Association of Chartered Certified Accountants (ACCA).
Even those that do trade, typically do
so at a level considerably under the tax threshold, says the Association.
The recent Joint Committee Report (30 September 2004) on the Draft Charities Bill
says that charities which participate in ‘non-primary purpose trading’, are exempt from paying tax provided that the revenue from their trading activities does not exceed £5,000 or 25% of their total income,
whichever is greater. In other words, as long as its sole or primary aim is
not to raise funds, a charity with total income of £20,000 a year, including
donations, would be able to generate up to £5000 from trading, completely
tax free.
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Chas Roy-Chowdhury, Head of Taxation at ACCA, said: “Research into charitable trading levels has shown that trading revenue as a proportion of income for the top 200 charities was on average less than one quarter of a percent. This means that many charities are missing out on almost 25 per
cent worth of tax free revenue.”
In addition, charity shops enjoy 80 per cent relief from Uniform Business Rates (UBR) and the local authority has discretion to waive the remaining 20 per cent. They also currently enjoy a useful range of zero rates of VAT including on the donation and sale of goods in charity shops, fundraising
items and advertising.
Chas Roy-Chowdhury added: “As well as providing a prominent contact point,
charity shops can help build profile and provide a collecting point for donations. For charities which are unable to run shops, then organising fairs or bazaars are a good way of generating extra income. With donor
numbers in decline, smaller charities in particular need to become more savvy about how to make the most of their money, and how to fully exploit the tax breaks at their disposal.”
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.