Charity trustees need to be aware of their tax obligations

The recent announcement that the trustees of the Charity Fashion for Relief, including Naomi Campbell, have all been banned from being charity trustees for a number of years due to ignoring their tax obligations must be a wake-up call for UK charities.

Robert Salter, Director, said:

Reports indicate that Ms Campbell received various ‘perks’ from the charity Fashion for Relief while involved in Trustee duties, these included free spa treatments and cigarettes. Such perks aren’t just arguably incompatible with the moral duty of a charity, they also create a tax obligation.

The provision of benefits or perks to a charity employee, including a trustee, are subject to income tax and often National Insurance (NIC) too. As such, the charity has an obligation to report such perks to HMRC either via a payroll or sometimes a P11D form.

When a charity hasn’t accounted for the UK tax and NICs on benefits provided to trustees, HMRC will look to capture the PAYE and NIC which is due via a Tax Settlement. This makes the charity liable for any tax and employee NICs which should have been accounted for by the trustee or other employees.

However, if HMRC decide that individual trustees received their perks knowing that the charity was ignoring its tax obligations, they can impose the tax liability on those trustees rather than the whole charity.

Robert added:

The Fashion for Relief case should act as a reminder to all trustees that they need to be pro-actively involved in the overall direction and control of a charity and to ensure that professional advice and guidance is being obtained and followed.

Would you like to know more?

If you have any questions about the above, please get it touch with your usual Blick Rothenberg contact or Robert Salter using the form on this page.