FAQ’s
Set-ups and structures
Is a CIC or a charity right for me?
When choosing between legal structures, there are various types such as CIC or CIO. The structure you use is determined by the circumstances and long-term aims of your non-profit organisation. For further information, contact a member of our expert team.
Can I convert my CIC to a charitable company or CIO?
Yes, this is possible by submitting the correct forms to Companies House and/or the charity commission.
What do I have to submit as CIC?
A CIC must submit accurate accounts and a CIC34 report to the Companies House.
What is the difference between companies limited by shares or guarantees?
With companies limited by shares, shareholders have access to a portion of the profits. For companies limited by guarantee, profits are not distributed, making them more suitable for non-profit organisations.
When does my charity need an audit?
Once your income is over 1 million, or if your gross assets are more than 3.26 million you must have a full audit. Audits are a specialist area only offered by authorised auditors. Unfortunately, not all accountants offer them – we do not offer audits.
What is the difference between an independent examination and an audit?
An audit is a comprehensive check of all accounts, and an independent examination is an overview of the legitimacy of accounts. We offer independent examinations when a charity has a turnover of over £250,000.
Where do accounts get sent?
Depending on your organisation’s legal structure, there are three bodies you must send accounts to:
- Companies House – keeps records of all UK companies including financial information
- Charity Commission – they regulate charities and charities submit accounts annually
- HMRC – if your organisation is registered for tax purposes then you will submit a return to them annually
I haven’t registered as anything, but I’m a non-profit – is that okay?
No, you must register as something unless you’re running a small group and your income is less than £5000. At this stage, you can be an unincorporated organisation, but there are still rules to follow.
Day-to-day bookkeeping
How can we account for restricted and unrestricted funds?
This is a very common question – there are lots of different ways you can account for this, and we would be more than happy to advise. For further guidance, contact a member of our expert team.
Do I need accounts software?
Yes, in most cases we recommend accounts software such as Xero or Liberty Accounts, but there are many other options to choose from.
Will every accountant work with charities/non-profits?
No, non-profits are often turned away by accountants. But this is where we step in. Community Accountants is the best accountancy firm to assist your charity or non-profit.
Why do you ask? Well, we have specialist experience in this field, and we value the incredible work of charities. Therefore, we offer lower fees and donate all profits to supporting vulnerable young people in the workplace.
What bank should I use for my non-profit organisation?
Several banks can be used, yet the process is slow – patience is required!
Tax and VAT
Do non-profits pay taxes?
There are plenty of misconceptions about this one. Overall, non-profits are treated like any other business when it comes to tax however, there are some exemptions. For more information, contact the specialist team at Community Accountants.
Do we need to register for VAT?
As with any other organisation, if your VATable suppliers are over the threshold then you must register.
Can we get reduced VAT on services?
On certain goods and services, your suppliers may be able to charge you a reduced rate of 5%.
What is counted as trading for a charity?
Trading is a complex area, but if trading doesn’t relate to your primary purpose, then you will be taxed on the income.
These are the current exemptions:
| Charity’s gross annual income | Maximum permitted small trading turnover |
|---|---|
| Under £32,000 | £8,000 |
| £32,001 to £320,000 | 25% of your charity’s total annual turnover |
| Over £320,000 | £80,000 |
What is gift aid and how do we apply for it?
In summary, gift aid is when you receive extra money from HMRC when UK taxpayers donate to your charity – you do not need to apply for gift aid.
Payroll
Do we need to tell HMRC when we pay someone?
You need to register as an employer with HMRC and use software to calculate salaries, tax and national insurance due.
Our CEO invoices us for their pay - is that okay?
Generally, the answer to this question is no. Someone is either an employee or they’re not, and if they’re an employee they must be on the payroll.
How often do we pay HMRC?
Monthly, but small employers can pay quarterly.
Do we have to operate a pension scheme?
It is a legal requirement to operate a pension scheme and eligible workers must be enrolled on the scheme.
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