Anyone who’s involved in operating a charity knows how it differs from running a business, both in terms of motives and objectives.
HMRC treats non-profit organisations and charities very differently to businesses, offering some unique tax breaks in the process.
If a charity is recognised by the tax authority, it will benefit from certain tax reliefs as long as the funds raised are used for charitable purposes.
Charities usually pay tax when they receive income that doesn’t qualify for tax relief, or if any income has been spent on non-charitable purposes.
With unique tax breaks come unique challenges, many of which have been exacerbated by the pandemic, especially in the case of smaller charities.
The public’s generosity has been directed largely towards the UK’s major charities, including the NHS, leaving many others facing financial ruin.
There’s a reputational issue, too. More than other sectors, charities depend on public trust, and are expected to be ultra-transparent.
It only takes one example of fraud or financial mismanagement
for faith in the concept of supporting the charity to be dented.