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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4189
Experience:  FCCA FCMA CGMA ACIS
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I have recently been involved in organizing a Country Fair

Customer Question

I have recently been involved in organizing a Country Fair and a reasonable profit was made. From the profits we intend to make donations to clubs and societies within the community. However we would like to withhold sufficient funds in order to cover the cost of running a similar event in 2015. We are not a registered charity. This event has been organised by volunteers who have given their time freely and non have received any financial reward. Are we liable for Tax on any of the revenue.
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 would suggest that the method of operation you are using is akin to that of a members' club. In that case your activities are confined to trading between members and outside the scope of UK taxation. I would draw your attention to HMRC Information Sheet BIM24215. From a perusal thereof it is pretty clear.
The following extract is pertinent:
'The first issue which clubs and their advisers need to consider here is whether any of a club's activities are undertaken in a sufficiently commercial way to constitute a trade. The well-known 'badges of trade' are relevant here but one particularly useful question to consider is whether the activities in question are broadly similar to those of an admittedly commercial undertaking, even though they are, perhaps, conducted on a smaller scale.
If no trading activities can be identified, then the further issues considered in this article do not arise.'
You do not trade; simple as the Mercat in the TV advert would say.
This second extract puts your activities well in the clear:
'For mutuality to apply there must be a class of contributors to a common fund who are also entitled, as a class, to share in the surpluses of that fund. By this we mean that arrangements must be in place whereby surpluses always come back to the class of contributors/participators. Individuals may continually be joining and leaving such a class without prejudicing this requirement but there must be a reasonable relationship between the contributions a participator makes and what he or she is entitled to receive both during the course of the business and on a winding up. Direct ownership of the common fund by such a class is not required. For example, a separate legal person may own the fund, typically a company limited by guarantee and having no share capital, so long as the class indirectly owns the fund through its control of the company.
The effect of the doctrine of mutuality is that any trading surplus which a club derives from transactions with such a class of contributor/participator is exempt from tax and, similarly, any loss or deficit cannot be relieved.'
I would not worry about tax in your situation one iota. Organisations of your type are in their thousands in the UK and HMRC have better things to do than worry overmuch about their activities.
I do hope I have shed some light on your position and set your mind at rest on this matter.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.