Recently we hosted a workshop on VAT at the Heritage Trust Network Conference, which brings together charities involved in restoration and heritage projects from across the UK. We work with many charities, from smaller local trusts dedicated to one building through to established charities planning capital projects, with accounting advice that helps them to keep their project running. With that in mind, here are some of our experts’ tips on getting your project’s finances right from the outset.
1. Pin down your plan from the start
Dave Roberts, Director of Accounts and Business Support
A business plan and its financial projections are critical tools. They will be reviewed at some point by funding bodies, banks, councils, charity regulators, HMRC, and more. It’s important, then, to get your business plan right to reflect the correct things about your project.
A business plan is a guiding tool that shows how your project will function, make money and spend money. So as well as being important for HMRC (to, for instance, check revenue plans and eligibility for VAT refunds – more on the next page), it is also a good management guiding tool for you. The more detailed and focused the plan, the more it will help you six, twelve, and twenty-four months down the line. My tip is to create a plan that will be practically useful as a reference to you both now and in the short/medium-term.
For help with projections and planning, contact Dave at firstname.lastname@example.org
2. Getting grants? Audit them for assurance and budget insight
Euan Morrison, Head of Charities and Director of Audit
Grants are one of the key sources of funding for charities and can be critical to a project’s viability. Grants are usually awarded for specific, and not routine, purposes: you will usually need to provide a breakdown of how you will spend the grant when you apply for it.
Some grants require that the resultant expenditure is audited to guarantee that the grant is spent correctly. This is something of an administrative extra, but is an important management tool in its own right: it details expenditure which gives you an opportunity to review project costs and identify savings.
If you’d like to understand more about grant audits, contact Euan at email@example.com
3. Get ongoing specialist support
Anne Paddock, Accounts and Business Support Senior Manager
Don’t be afraid to ask experts for help, or even secondment support – your finances are vital. It can be cheaper to rely on an external supplier with project expertise such as us than to hire a dedicated person or people.
We have useful tools that you can use: we can supply accounting software; our payroll team can administrate your wages and pension obligations; and, of course, we can help with everyday accounting support and compliance. My tip, therefore, is to investigate the expertise that is available to you because it may well save you money later on.
Contact Anne at firstname.lastname@example.org
4. Consider your VAT position
Iain Masterton, Director of VAT
VAT is a complicated area but it’s worth knowing your position – after all, this can be up to 20% of your total project budget. It’s very important to consider VAT from the outset because your position and your ability to recover VAT will be affected by the activities that go on in your building and the services you intend to deliver. For instance, if you don’t intend to charge for activities in your site once it’s open, then this may mean you can’t recover VAT on certain items in the future.
To recover VAT, you need to register for VAT. HMRC will want to look at your business plan to assess your activities and make sure you intend to trade. It’s usual for heritage trusts to have a mixture of activities, some of which are good and some of which are bad for the purposes of VAT recovery. The complication then is to calculate the right amount of VAT that’s recoverable, and that can rest on case law and tribunal decisions, as well as legislation.
My main tip is to get VAT input from as early a stage as possible – this will usually be cheaper than trying to retroactively work out your VAT position further down the line.
For VAT support, contact Iain at email@example.com
5. There are tax reliefs designed to help make these projects viable – use them
Catriona Finnie, Tax Manager
My tip is to identify the tax reliefs you can claim so that you can budget properly for your business plan.
There are a variety of reliefs available, though they do require you to be in the scope of corporation tax to claim them. If you’re a larger, pre-existing charity then you may already have a trading subsidiary that pays corporation tax. If not, you should seek our advice to see if you can benefit from having a subsidiary company. Trading subsidiaries may also be able to claim capital allowances on project expenditure. You should also consider how the project funding will be provided and whether this has any impact on the charity’s corporation or income tax exemptions.
Don’t forget too that there are ongoing reliefs available. If your project will host creative events, for instance, you might be able to benefit from Theatre Tax Relief or Orchestra Tax Relief. We will be able to help you identify the right reliefs for you.
Gift Aid can be a valuable source of additional income for charities and you should ensure you are maximising your income from this where possible; especially where projects will be funded in part or in full from donations.
Contact Catriona for tax and Gift Aid advice at firstname.lastname@example.org