How is my charity different from any incorporated company?
The main difference between a charity and a corporate entity lies in its purpose .
The Purpose
The purpose of an incorporated entity is to make profit while the purpose of a charitable company is to benefit the public. This means it has charitable purposes and it the main objective of such an entity is not to make or maximize the profits.
The charitable purposes as defined by gov include things that contribute to:
- Relieving poverty
- Education
- Religion
- Health
- Saving lives
- Human rights
- Religious harmony
- Animal protection
- Protection of the environment
Appointing a Trustee
If you want to run a company you need to appoint the trustees. You will need at least 3 trustee to run the charity.
They will use their skills, knowledge and the industry experience to run the charity.
They will also play a major role when it comes to recruiting new senior staff.
HMRC provides complete guidance on how to recruit trustee for the charity.
The structure:
You will have to chose a structure for your charity which will affect the way you will run the charity, who will run the charity and what the charity will do.
You can chose from the 4 charity structures:
- Charitable company
- Charitable incorporated organization
- Charitable trust
- Unincorporated charitable organization.
These structures are briefly explained below:
Charitable Company:
The charitable company will have to be limited by guarantees rather than shares when you register.
You will have to register the charitable company with the companies house.
Trustees have limited or no liability for a charitable company's debts or liabilities.
Charitable Incorporated Organisation:
A CIO is an incorporated structured design for charities. You need to register with Charity commission rather than companies house.
Trustees have limited or no liability for CIO debts or liabilities.
Charitable trust
A charitable trust is a way a group of people who are actually the trustees to manage assets such as money, investments, land or building.
Unincorporated Charitable Association
This is the simplest way to run the charity. A group of people come together to run the charity for the common purpose.
Unincorporated charitable associations cant employ staff or own premises.
Income
Once you have defined the purpose of your charity , and decided on the structure you need to register yourself with the company's house.
You will have to register yourself if it's income is at least £5000 or if it's a charitable incorporated organization.
Whereas if you are planning to set up a limited company you have to register it irrespective of any income.
Will I have to pay any taxes?
If you are running a charity you will have to pay taxes if :
- You have received income that does not qualify for the tax relief
- Spent any of your income on non-charitable purposes.
How will my charity pay taxes?
You will have to complete a company tax return if your charity is a
- Limited company
- Unincorporated organisation
You will also submit an annual return to the charity commission if the charity's income is above £10 000.
There are certain tax reliefs available. To find out more on the charity taxes and the tax reliefs available call Taxaccolega accountants in Croydon and our experienced accountants will be happy to help you.