Some fundraising decisions 'are causing tax headaches'

Better communication between departments is needed, expert warns

Charities are paying too much tax because fundraising and finance departments do not communicate effectively with each other, the author of a new free tax guide for charities has warned.

Pesh Framjee, head of not-for-profit at auditors Horwath Clark Whitehill, said fundraising departments often arranged events or agreed deals with corporate sponsors that left charities facing potential tax liabilities.

"Sometimes charities have to pay this tax, or have to carry out restructuring later on in the process to avoid tax, which involves a lot of avoidable work for both finance and fundraising departments," he said.

"For example, if a company sponsors a charity and that charity includes the corporate logo on its website, with a link to the corporate website, the company could be considered to be buying a service from the charity, creating a taxable income and exposing the charity to VAT.

"A finance department would be aware of those tax problems if it was involved at an early stage.

"We're increasingly seeing fundraising and finance departments realising this, and I'm providing much more advice for fundraisers," he said.

The Tax Implications of Charity Trading was written for chief executives body Acevo and the Charity Finance Directors' Group.

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