annual accounts and donations to charity

wildgoose1uk
wildgoose1uk Registered Posts: 200 ? ? ?
I have a client who set themselves up as a limited company instead of a charity. We have now got them set up as a charity and are in the process of winding down the limited company. This may take a whille as they get an income stream of donations into the company bank account and it may take a while to get people to change their standing orders.

I am doing the limited company accounts and am trying to find ways of reducing the tax burden as it should have been a charity anyway. The income is mostly donations with another small inflow from sales of mp3 recordings directly related to the charity.

For this year I will get them to amend their mem & arts and covenant all profit to the charity and make the company a subsidiary of the charity (unless I can get them to agree to wind it up) but for last year I am wondering if I can accrue a donation to charity? I need to loo at this further but just don't have the time today.

All thoughts/ideas/advice and suggestions welcome :)

Thanks

wg

Comments

  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    Why can't charities be limited companies? We have loads of ltd company charities at work.

    Why do they have a "tax burden"? Charities are not for profit. Has Form CHA1 been completed and dispensation from corporation tax been sort?
  • wildgoose1uk
    wildgoose1uk Registered Posts: 200 ? ? ?
    reader wrote: »
    Why can't charities be limited companies? We have loads of ltd company charities at work.

    Why do they have a "tax burden"? Charities are not for profit. Has Form CHA1 been completed and dispensation from corporation tax been sort?

    I suspect you may find you have loads of charities that are companies limited by guarantee and not shares.

    Form CHA1 has not been completed as the limited company does not meet the qualifying conditions.

    If you know of a way to convert a limited company to a company limited by guarantee then I would be interested to hear it.
  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    I suspect you may find you have loads of charities that are companies limited by guarantee and not shares.

    Form CHA1 has not been completed as the limited company does not meet the qualifying conditions.

    If you know of a way to convert a limited company to a company limited by guarantee then I would be interested to hear it.

    Thanks for the reply; you right; all the ltd charities are by guarantee; this forum is great!
  • wildgoose1uk
    wildgoose1uk Registered Posts: 200 ? ? ?
    I think I am being a bit overenthusiastic in accruing a donation to charity.......I don't think it will fly.
  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    Are you suggesting accruing a donation equal to the net profit of the ltd company to the charity in order to reduce profit in the company to nil and therefore eliminate the corporation tax liability?

    If you had corporation tax dispensation via Form CHA1 I would say that the accrual is fair enough however because no dispensation is in place I think the ltd company may be liable for tax on its "profits".

    It's probably worth calling CCH and HMRC's specialist charities unit.
  • wildgoose1uk
    wildgoose1uk Registered Posts: 200 ? ? ?
    I think you can only put donations to charity against your ct liability in the year they are made. Given that the charity was not registered at the time and the donation was not made in that year then I don't think it worth pursuing.

    Like I said before CHA 1 is not appropriate in this case.

    Thanks anyway though
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