Social enterprises (commercial organisations set up to make improvements in human and environmental well-being, rather than maximising profits for external shareholders) can be structured as a for-profit or non-profit, and may take the form of a co-operative, mutual organisation, a Community Interest Company (CIC), or a charity.
Charities and other social enterprises vary immensely in their size, structure and objectives and each has very different requirements from other businesses.
We act for over 250 charities throughout the South West, both large and small. We also act for a number of CICs, Registered Social Landlords (RSL), Industrial and Provident Societies (I&P), clubs and associations. Many of our partners are charity trustees themselves and so we understand from a practical angle the challenges you face.
Expertise in accounting and legislation
So that we can deliver the best possible compliance service, our service teams need to be specialists in the Charities and RSL SORPs, the requirements of the CIC regulations, Charities Act, Companies Act, I&P Acts and Community Enterprise law.
For CICs we understand the Community Interest Test and the Statutory Asset Lock and the need for statutory clauses in your Articles of Association
As a firm we have been involved directly in the consultation over the new Charities’ SORP and our annual charity conference and twice yearly newsletters are the mechanisms we use to pass this expertise onto our clients.
Expertise in audit
Audit is about understanding risk and the charity and social enterprise sectors carry their own specific risks. These are linked to an understanding of income sources; the need to spend in accordance both with charitable purpose and grant conditions; and the understanding of the enhanced risk of fraud and ‘improper’ spending in certain parts of the sector.
Performance measurement and risk management form the backbone of our audit approach which, from a financial perspective, is exactly what the trustees are focusing on. We believe our approach is refreshing and unique, focusing on the figures in the accounts and the risks associated in their construction, communicated transparently to the trustees through our annual report, delivered in person by the partner. We do not believe that a good audit is simply one where all the boxes have been ticked - a junior auditor can tick 100 checklists, ask any number of ill-informed questions, and achieve very little. By working closely with management, enabling us to get underneath the figures, and sharing this understanding with the trustees, we believe that we deliver a better audit and give confidence to trustees to sign the accounts. Most auditors don’t approach their work in this way.
Expertise in tax
We are tax specialists, including in the application of tax law to charities, both for direct and indirect taxes. We help manage our clients’ tax risks, in a range of areas, including Gift Aid, VAT, employee tax, property tax and tax on trading activities.
If you simply collect voluntary donations and pass them on to beneficiaries, perhaps things are not too complicated. No VAT to worry about? No Corporation Tax? But what about the VAT concessions you can claim on expenditure? What about Gift Aid - do the donations qualify and how do you go about reclaiming? How about employee taxes including P11D benefits?
If it is more complicated and you have various sources of income, to start with you will need to understand whether the income is ‘trading’ income (for Corporation Tax) or ‘business’ income (for VAT). The definitions are different.
If the income is deemed to be trading, does it get taxed or is it exempt from Corporation Tax? Is it ‘primary purpose’ income or ancillary to primary purpose? What if the trading is undertaken by beneficiaries? Is there a de minimis? What about lettings income?
If, for VAT, it’s business income, is it exempt, zero-rated or taxable? If you have a mix, how much can you reclaim? If you have a capital scheme, what VAT can you claim back? What if the building is partly for charitable purpose and partly business? Is there a de minimis?
A whole series of questions, most of which don’t have a simple answer. If you get this wrong, you will end up paying more tax that you need to. We’re here to help.