Sales revenue or not?

leonag

Hi

I have a client who as a newly started women in business, recognised that in our area there were no women's networking groups. She proceeded to set up a a group from which she makes no profit. She books the restaurant and charges all the attendees the cost of their meal and drink.

Should I included this income as part of her turnover as it's not her business income? I'm worried how this is going to affect her tax positon, if I put all that she charged down as sales income, the meals will be disallowable as entertaining and so she will owe more tax. Am I correct in my reasoning here or is there a get around as this isn't for her business.

Thanks

T.C.

My instincts say that the income should be declared, but that the cost of the meals would be a direct expense of the business, not an entertaining expense.

BIG WAL

I would have thought that as the Networking group is a separate activity, and not related to her
business, income and expenditure should not be included in the accounts.

This is a not for profit group, and presumably the charge to those attending is purely to cover costs.
Whilst there may be a small occasional surplus this would be used to offset any future deficit.

There is a responsibility to the group to keep a simple record of income and expenditure, which would
also be for her own protection.

What can go through her main business as a legitimate expense is her own contribution to each event, which will be the same that everyone else pays.

T.C.

Actually that makes sense to me too!

leonag

Thanks guys

I think I just had a moment of panic. Last year she made a loss, this year she's turned a profit but this networking group could make the difference between tax or not, and for a small business that's a big issue.

She wants to put the income through her accounts, as she's worried that in future she may have to charge a fee as the group is growing rapidly and taking more time.

SandyHood

This is little more than a club for the benefit of its members. It derives no profitable income. The networking group ultimately pay for a meeting place from the subs of members.

I have a resident's group with a similar situation. In fact, because they hold a surplus on deposit I discussed the implication of tax on interest with HMRC who felt that a profit of under £100 would not be taxable.

If she is looking to charge a fee, then help her set something that can be seen to be at arm's length, and simply bill the group. The group would then pay her in just the same way that the restaurant also bills the group.

reader

BIG WAL wrote: »

This is a not for profit group,

Agreed- this doesn't really sound like a taxable business as there's no real profit-making purpose and commercial angle.

If it did become a business, i.e. higher value income transactions, income transactions on a more frequent basis, profit-making purpose, business structure/invoices, then she should declare the income, and this income may even have to be added to her existing income and if the sum is over £79,000 she may have to register for VAT and charge VAT in both businesses. Although the two businesses may be distinct enough to prevent HMRC from arguing that the income should be combined re: VAT registration purposes.