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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am a volunteer Director of a not-for-profit community company

Customer Question

I am a volunteer Director of a not-for-profit community company (VAT registered). Our income is from a micro hydro scheme. We spend the income on sustainability projects for our rural community. Sometimes, we purchase assets which can benefit members of our community (e.g. an electric car). We have set up a separate bank account for this experimental project so we can charge car users a small amount (not including VAT) - just enough to cover the car's running costs. Our motivation for the project is to enable people to experience driving an electric vehicle. The user money collected does not get paid back into the company - it is simply used to pay off car bills as they arise. We are now anxious about whether such an arrangement is OK? As a company run by volunteers, we don't really have the bandwidth to register every invoice to every car user - they are all multiple tiny payments - anything from £2 to £50 say.
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

I have a degree of concern as to your exact activities. You clearly operate VAT properly on the majority of your business. You should also be doing the same with the user experience element. The fees received should be booked net of tax and the bills put through in the normal way as expenses and input tax reclaimed. You do not need to issue formal invoices for every transaction, indeed for many traders this would be impossible and minor bills can, of course, be batched together. You could try writing to HMRC for guidance in this matter, but I have a shrewd suspicion that they would expect you to do I as have intimated and run the transactions through the VAT system. Still, there is no harm in asking and it will only cost you a 50p stamp. You never know, they might even say yes; not all HMRC staff are impractical ogres.
Customer: replied 3 years ago.

Thanks for your help. It's not quite what we'd hoped for, since what we have is a group of individuals in our community who use our asset, but do not pay us directly. They operate it - re-charge it, maintain it, insure it etc - at their own expense by setting a rent which they collect and use simply to cover those costs. As a community benefactor, we do things like this all the time, and we don't expect to be involved in the costs of employing such assets even if they remain our property. Would it simplify matters if we just donated the assets to the group? That's difficult to do unless they are legally constituted to own and operate such an asset, and of course then they may be seen by HMRC to be trading.

Expert:  bigduckontax replied 3 years ago.
I do understand your situation. As an accountant I have been involved practically with numerous voluntary organisations and regret to say I have had to ask some over enthusiastic volunteers to wind their necks in, sick to voluntary work and leave the accounting to me and the whole world will go around a lot faster!

It could well be argued that each volunteer is operating in his or her own personal capacity and is below the VAT registration level. However HMRC may look on such an arrangement with a very jaundiced eye fearing tax avoidance (legal) or even worse evasion (illegal). I can also see the organisation's danger, or rather the enormous inconvenience, of being classified as a trader.

From this aspect I would still be inclined to run it across HMRC. Their staff are usually most helpful and highly experienced in such matters and will give good guidance. As a voluntary organisation it could find itself outside the scope of the tax altogether.

Of course, if your organisation gave away the asset out of it's domain the problem would go away, but would the trustees approve of the donation and, indeed, would it even be lawful or outside the organisation's powers?
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.
Thank you or your support.
Customer: replied 3 years ago.

I rated your reply at the time so I'm not quite sure why I'm now (5 months later) getting repeated emails wanting another rating?!


 


If this continues, I'm afraid there WILL be another rating but not a good one!


 


Thanks

Expert:  bigduckontax replied 3 years ago.
It is nothing to do with me I assure you! I concluded my involvement with my thanks. There is, I understand, a glitch in the JA system which keeps bring up old questions repeatedly. I get a few myself. Your solution is to formally close your enquiry and this nonsense should cease.
Customer: replied 3 years ago.

Thanks. Will do that.

Expert:  bigduckontax replied 3 years ago.
Delighted to help.

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