Charities and not for profit organisations – is an accountant a ‘nice to have’ or a necessity?

6th June 2019

Not for profit organisations are treated very differently under the law, and managing a charity’s accounts can offer some unique challenges as a result.

In recent years, charities have faced pressure through a combination of reduced investment from central government and economic uncertainty. While more people are looking for help from charities, fewer people feel able to give. Careful accounting can help maximise every penny of your funding whilst ensuring compliance with the complex rules and regulations.

Charities are dependant on public trust, and are thus expected to be ultra-transparent. It only takes one case of fraud or financial mismanagement for faith in the entire idea of supporting charity to take a knock and single, isolated incidents can have an effect on the industry as a whole.

What counts as a charity?

 The official definition of a charity, for tax purposes, is as follows:

“a body of persons or trust… using all its income and assets for its stated charitable purpose”

However, the specifics are kept deliberately vague to give the Charity Commission room for manoeuvre. Charities must validate their status with the relevant Charity Commission or Regulator for their region before HMRC will issue the all important tax reference number which sets how the organisation will be treated for tax purposes.

Navigating the paperwork overload

Due to the complicated rules and regulations that charities must adhere to, it’s important to appoint someone to decipher the guidance and ensure compliance.

A prime example of this is Gift Aid. Anyone who has ever dropped off a bag of books at a charity shop or sponsored a colleague’s 10km run online will be familiar with the question: “are you eligible for Gift Aid?” In the simplest terms, Gift Aid enables charities to reclaim an additional 25p for every £1 donated by an individual (or on the amount your unwanted goods are sold for) but because of the potential for abuse of the scheme, Gift Aid comes with a lot of responsibility and paperwork.

Government guidance on Gift Aid is hefty and intricate, covering everything from church collections to charity auctions, so it’s definitely worth consulting an expert, to make sure you make the most of this valuable relief without falling foul of the rules.

How can we help?

Gift Aid is just one example of the complex rules for charities. As experts in charity accounting, we’re here to help keep you compliant, make sure you’re making the most of your reliefs and grants, and handle some of your financial admin so you can focus on fundraising and delivering services.

Some of the main tasks we support are:

  • ensuring finances are managed carefully and systematically
  • preparing your annual accounts and/or annual reports
  • making sure no more tax is paid than necessary
  • maximising income from investments and assets
  • ensuring compliance

If you’re a trustee of a charity looking for further help and advice, or wish to set up a new charity, contact us today for more information on 01926 422292.