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)?
Im 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.
