Your charity needs an audit if:

•   Gross income exceeds £1 million.
•    Total assets (before liabilities) exceed £3.26 million with gross income over £250,000.

Or

•  if the charity governing documents require an audit 
• If it’s a grant condition to have one. 

A charity will need  an independent examination is required if:

•   Gross income falls between £25,000 and £1 million.
• Consult with a charity accountant to ensure compliance and determine the appropriate level of scrutiny for your charity's financial affairs.

Restricted funds and unrestricted funds are two categories used to classify the financial resources of a charitable organization:

1. Restricted Funds:

•    Restricted funds are donations or grants received by a charity that are earmarked for specific purposes or programs as designated by the donor or grantor.
•    Donors may impose restrictions to ensure their contributions are used for particular projects, initiatives, or expenditures outlined in the donation agreement.
•     Examples of restricted funds include donations designated for a specific research project, scholarship program, building construction, or humanitarian aid in a particular region.

2. Unrestricted Funds:

•     Unrestricted funds are financial resources available to the charity that have no donor-imposed restrictions on their use.
•    Charities have the flexibility to allocate unrestricted funds according to their operational needs, strategic priorities, and mission objectives.
•     Unrestricted funds are essential for covering day-to-day operating expenses, administrative costs, staff salaries, and other ongoing activities that support the organization's overall mission and sustainability.

In summary, restricted funds are donations with specific usage restrictions imposed by donors, while unrestricted funds are funds that charities can use at their discretion to support their general operations and activities. Both types of funds play crucial roles in the financial management and sustainability of charitable organizations.

In the context of UK charities, "reserves" and "free reserves" refer to different aspects of the organization's financial resources:

1. Reserves:

• Reserves represent the portion of a charity's unrestricted funds that it sets aside for specific purposes or to provide financial stability.

• Reserves serve as a financial buffer to help the charity manage unexpected expenses, economic downturns, or fluctuations in income.

• Charities may designate reserves for various purposes, such as emergencies, capital projects, future commitments, or to cover potential liabilities.

• Reserves are typically managed and allocated according to the charity's financial policies and guidelines.

2. Free Reserves:

• Free reserves refer to the surplus funds or unrestricted reserves that remain after deducting any designated reserves, restrictions, fixed assets,  or liabilities from the charity's total unrestricted funds.

• Free reserves represent the portion of unrestricted funds that the charity can use at its discretion to support its activities, programs, and initiatives.

• Unlike designated reserves, free reserves do not have specific earmarks or restrictions on their usage, providing the charity with flexibility in allocating these funds to meet its operational needs or strategic priorities.

• Free reserves contribute to the charity's financial sustainability and provide a cushion for covering day-to-day expenses, investing in growth opportunities, or responding to unforeseen challenges.

In summary, reserves encompass all funds set aside by a charity for specific purposes, including both designated and undesignated amounts, while free reserves specifically refer to the surplus of unrestricted funds available for discretionary use by the charity. Both reserves and free reserves are essential components of a charity's financial management strategy, contributing to its stability, resilience, and ability to fulfill its mission effectively.

1. Who can make a Gift Aid donation?

   Gift Aid donations can be made by individuals who are UK taxpayers and have paid enough income tax or capital gains tax in the tax year to cover the amount reclaimed by the charity.

2. How does Gift Aid work?

    Gift Aid allows charities to claim back 25p for every £1 donated by eligible taxpayers, increasing the value of the donation at no extra cost to the donor. The charity must have a valid Gift Aid declaration from the donor to claim Gift Aid.

3. What types of donations qualify for Gift Aid?

   Most monetary donations, including cash, cheques, bank transfers, and contactless payments, are eligible for Gift Aid. However, certain types of donations, such as membership fees or payments for goods or services, do not qualify.

4. What is a Gift Aid declaration?

   A Gift Aid declaration is a statement provided by the donor, confirming that they are a UK taxpayer and consenting to Gift Aid being claimed on their donation. The declaration typically includes the donor's name, address, and a statement confirming their taxpayer status.

5. How can I make a Gift Aid declaration?

   Donors can make a Gift Aid declaration by completing a form provided by the charity, either electronically or in paper format. Alternatively, donors can often make a Gift Aid declaration online when making a donation through a charity's website or fundraising platform.

In the UK, charities are generally exempt from paying certain taxes on their charitable activities, but they may still be liable for other taxes depending on their income, activities, and structure. Here's an overview:

1. Income Tax and Corporation Tax:

   Charities are generally exempt from paying income tax and corporation tax on income and profits generated from their charitable activities. However, they may still be liable for tax on income generated from non-charitable trading activities or investment income that does not directly support their charitable purposes.

2. Value Added Tax (VAT):

   Charities are often eligible for VAT relief or exemptions on goods and services purchased for their charitable activities. However, they may still need to pay VAT on certain purchases, particularly those that are not directly related to their charitable purposes or are exempt from VAT relief.

3. Business Rates:

    Charities may be eligible for relief from business rates on properties used for charitable purposes, such as offices, shops, or community facilities. However, they may still be liable for business rates on properties used for non-charitable purposes or for generating income through commercial activities.

4. Stamp Duty Land Tax (SDLT):

   Charities may be exempt from paying SDLT on property purchases or leases for charitable purposes. However, they may still need to pay SDLT on transactions involving non-charitable properties or activities.

5. Payroll Taxes:

   Charities are generally subject to the same payroll taxes as other employers, such as National Insurance contributions and PAYE (Pay As You Earn) income tax deductions for employees. However, they may be eligible for certain reliefs or exemptions, particularly for employees engaged in charitable activities.

Overall, while charities are generally exempt from paying certain taxes on their charitable activities, they may still have tax obligations for non-charitable activities or income. It's essential for charities to understand their tax responsibilities and seek advice from tax professionals or advisors to ensure compliance with relevant tax laws and regulations.

In the UK, it is generally permissible for charities to pay their trustees, but there are strict legal guidelines and considerations to be aware of:

1. Charity Commission Guidance:

   The Charity Commission provides guidance on trustee payments, emphasizing that payments should be in the best interests of the charity and must be justified as necessary for the charity's work. You can find more information on trustee payments on the Charity Commission's website https://www.gov.uk/government/publications/trustee-expenses-and-payments-cc11/trustee-expenses-and-payments

2. Trustee Remuneration Policy:

    Charities should have a clear trustee remuneration policy in place, outlining the circumstances under which trustee payments may be made and the procedures for determining and approving such payments.

3. Legal Restrictions:

   Some charities may be prohibited from paying their trustees based on their governing documents (such as their constitution or trust deed), particularly if they are established as charitable trusts. It's essential to review the charity's governing document to determine any restrictions on trustee payments.

4. Approval Process:

    Any payments to trustees must be authorized and approved by the charity's governing body (such as the board of trustees or management committee) in accordance with the charity's procedures and legal requirements.

5. Avoiding Conflicts of Interest:

    Trustees involved in decisions regarding their own remuneration must avoid conflicts of interest and recuse themselves from discussions and voting on the matter.

6. Proportionality and Reasonableness:

    Trustee payments must be proportionate and reasonable in relation to the services provided and the financial resources of the charity. Excessive or disproportionate payments may be deemed inappropriate or unjustifiable.

7. Transparency and Reporting:

   Any trustee payments made by the charity must be transparently disclosed in the charity's annual report and accounts, including details of the amount paid, the recipients, and the rationale for the payments.

Overall, while it is possible for charities to pay their trustees, it must be done cautiously and in compliance with legal requirements and best practices to ensure transparency, accountability, and the best interests of the charity. Charities should seek professional advice and guidance when considering trustee payments to ensure compliance with charity law and regulations.