Leader magazineASCL - Association of School and College Leaders

Advantages of charitable status

In these times of heavy demand on budget allocations, schools and colleges are seeking additional financial resources in a more wholehearted way than ever before.

They may well raise substantial funds, which they can place on bank deposit, pending the allocation of those funds for the benefit of the school or college. Donated funds are usually held in the envelope of a charitable trust because of the tax advantages (see below) given to both individual and corporate donors and recipient schools and colleges.

Most charities are registered with the Charity Commission. Although trust funds which are not comprised of land or permanent endowment or have an income of less than £1,000 per year are not required to register, voluntary registration will help to avoid any argument as to whether the fund is a charity. Most charities which are not registered simply apply their funds for the benefit of other registered charities.

Note that FE colleges and foundation schools are considered 'exempt charities', and do not themselves register with the Charity Commission. FE colleges and foundation schools are only required to notify HM Revenue and Customs (HMRC) by contacting HMRC Charities.

The Charity Commission registration procedure is not a difficult one. First inform the governors of the intention to establish the fund with HMRC consent and, if necessary, seek Charity Commission recognition of charitable status. The governors are not normally involved in the management or administration of the charity.

Next, call a meeting of three or four senior members of staff - say, head/principal, deputy heads/vice principals and/or other senior colleagues - who have expressed a willingness to become trustees of the fund, and explain the process to them. They will not actually assume the responsibility of trusteeship until the Declaration of Trust (see below) is executed.

All the trustees sign the Declaration of Trust which is then dated. Submit the declaration, together with any documentation requested for registration to the Charity Commission. A model trust deed (GD2) can be found on the Charity Commission website.

The commission will give instructions on the next steps to be taken. This will include sending notification of the registration to HMRC Charities,
St John's House, Merton Road, Bootle, Merseyside, L69 9BB. The fund should then, in due course, be accepted as charitable for tax purposes.

Assuming HMRC gives approval, the charity does not pay tax on any investment income or gains that it makes on its trust funds and the charity can recover tax on all charitable donations made by parents or third parties, provided they are taxpayers.

There is no need for a donor to enter a covenant agreement; all that is required is for the donor to fill in a Gift Aid declaration. A sample declaration can be found at the HMRC website at www.hmrc.gov.uk/charities/giftaid-charities/declarations.htm

Full details of how to register, and what it involves, can be found on the Charity Commission website at www.charity-commission.gov.uk/common/applyforit.asp All forms can be accessed from this website.

Once the charity has been registered, an annual report and a copy of its accounts should be presented at its year end to the governing body and sent to the Charity Commission and to HMRC at Bootle. An annual return will also be sent by the Charity Commission each year, which the trustees are required to complete and return.

The Charity Commission number for general enquiries is 0845 300 0218.

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