My Ltd Company runs an online directory that promises to donate 50% of it's revenue to local charities or community groups.
The two scenarios are that:
50% of advertising on a particular page or banner goes to a local charity/not-for-profit of the business' choice
50% of advertising on a particular page or banner goes to a local charity/not-for-profit of our choice
In both cases I'm taking all the money in and then paying the charity/non-profit. There's no conditions attached to the gift...it's just a gift!
I'm wondering though how I should set up sage instant to record this?
If, for example, I say that a banner advert is £25 + VAT and that 50% of net (£12.50) goes to charity then how would I record this?
Could it be 2 'products' ? Advertising for £12.50 + vat and donation of £12.50 + vat? (even though the charity only gets £12.50....and not the vat associated with it)
Or do I even have to put this detail on the invoice? I mean, advertising and charitiable donations are both tax deductable aren't they?
Could I just have the invoice charging for the advertising at £25 + vat and then simply have a statement saying '£12.50 of this will be given to X'?
Either way, what would anyone suggest I record these donations as, in sage instant? Are the charities a Supplier ( as I pay them) or do I simply record them using the Nominal Ledger's 'Donations' account under General Expenses?
My Ltd Company runs an online directory that promises to donate 50% of it's revenue to local charities or community groups.
The two scenarios are that:
50% of advertising on a particular page or banner goes to a local charity/not-for-profit of the business' choice
50% of advertising on a particular page or banner goes to a local charity/not-for-profit of our choice
In both cases I'm taking all the money in and then paying the charity/non-profit. There's no conditions attached to the gift...it's just a gift!
I'm wondering though how I should set up sage instant to record this?
If, for example, I say that a banner advert is £25 + VAT and that 50% of net (£12.50) goes to charity then how would I record this?
Could it be 2 'products' ? Advertising for £12.50 + vat and donation of £12.50 + vat? (even though the charity only gets £12.50....and not the vat associated with it)
Or do I even have to put this detail on the invoice? I mean, advertising and charitiable donations are both tax deductable aren't they?
Could I just have the invoice charging for the advertising at £25 + vat and then simply have a statement saying '£12.50 of this will be given to X'?
Either way, what would anyone suggest I record these donations as, in sage instant? Are the charities a Supplier ( as I pay them) or do I simply record them using the Nominal Ledger's 'Donations' account under General Expenses?
Any ideas would be reallly welcome!!
Many thanks
Paul
Is there a particular cause associated with the directory? If so then ok; however, if you are doing this as.a marketing ploy I would say it is ill advised. If I were a customer I would want to know if the Ad was coating £25 or £12.50. I would want the freedom to choose as and when I donate to charity.
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There is no single charity or community group, however, all businesses are informed before they sign where the £12.50 is going OR for some products, they get to choose where.
So, effectively, for all adverts costing £25 + Vat the advert is only costing £12.50 net. ALL clients are fully informed about this before they sign up. However, I'm putting vat on the £25 (makes it a round £30!) and halving the ex vat cost as I assume it simplifies things a bit.
All the money goes into my account and then I'm the one giving it back out.
Given this, how would you advise setting out this within sage? Just the advertising product and then a 'one liner' reminding them that half of it's going to a particular cause?
Although, with this method I'd not be able to get accurate reports of what has actually been donated would I?
Forgetting Sage and going back to the business model.
I'm hoping that someone tells me that I am wrong about this but my understanding is that the taxman still wants their cut.
You are collecting money on the promise that you will pass 50% on to charity. The person buying the services is not giving to the charity with you as a collector representing a registered charity but rather they are paying for a service from which you promise to give 50% of the proceeds to charities from your company.
That promise is taking all associates costs including tax liabilities within the 50% that you retain.
HMRC won't care about the intent at point of transaction. They will only consider that you have made £25 and corporation tax will be charged on that basis.
As such is it not the case that the only relief available is (per http://www.hmrc.gov.uk/businesses/giving/companies.htm)
£0 - 100 - 25% of the donation £101 - £1,000 - £25 Above £1,000 - 5% of the donation Above £10,000 - £500
taking a really simplistic example where you take £1000.
50% to charity £500 20% tax on donation £100 (born from the non donated funds) Relief available £25
So the company comes away with £425 from which all costs need to be taken with any remaining profit also being taxable.
Charity is not my strong point so I'm hoping that someone will come along and say no, no, no you've got that all wrong and the generous actions of this individual will receive greater tax relief than that.
However, I'm also thinking that to allow any other approach would simply mean that companies would give to charity rather than paying tax so I can see HMRC's point of view on this and feel that my understanding is probably correct.
Also, worth noting is that if you have shareholders the money is not yours to distribute like this.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
