Fundraising Company – How to handle and process charity money

Hello, we are a limited company which raises money for charity by selling our products with a portion of the sale price going to charity.

We have a contract with different charities which outlines that the money we raise is held in our bank account temporarily and later transferred to them.

We would like to make sure we are managing this as appropriate in our accounts and bookkeeping. This charity money that comes into our accounts should be exempt from VAT.

For example: We sell a product for £500.
£100 goes to charity.
£400 goes to our company.
In our book keeping, this is logged as £400 vatable, £100 vat exempt.

From a legal perspective and for easier management, would it be better to have two separate bank accounts (one for charity money, one for our money)?

I’m not sure whether this just over complicates things unnecessarily because we take payments by card terminal and either way (based on example above) the £500 would be going into our bank account to then be separated later.

It would be great if we can have some professional advice on this and whether this setup would be required or are we just overcomplicating our bookkeeping by splitting the bank accounts and transferring funds across the two bank accounts?

It would also be good to know if there are any other legal requirements for us to be processing charity money in this way.


  • Jpeterson85
    Jpeterson85 Registered Posts: 12
    Hello, is anyone able to help with this please?
  • laddi2010
    laddi2010 Registered Posts: 8 New contributor 🐸
    There are two things to consider

    First you have to have HMRC approval to charge sale as VAT exempt for charitable part of sale.

    You can still take the payment into your main account linked to credit card or any other business account.
    I would suggest you open a separate account and transfer the money end of month or week into that account.
    This will ensure you, you have not used the charity money. It will help you in year end accounts preparation

    Secondly you probably already doing it, Create an account in your chart of accounts which all the sale of charity part is recorded. Create a department or project as charity name so it will keep record of total sale received for individual charity.

    I hope it helps.

    S K Punia Accountant
  • BrNorton007
    BrNorton007 Registered Posts: 13
    edited January 2021
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