It is a difficult decision to decide whether to set up a charity if its income is going to be relatively low. All that form filling and red tape and for what?!
Well, for quite a lot actually. In order to register with the Charity Commission and get that all-important Registered Charity Number you need to be able to demonstrate an income of £5000 and that’s not always easy. Sadly the Charities Act 2006, raised the threshold to register from a much more modest £1000. However, it is income and not a bank balance of £5k. So, if you do start a charity and open a bank account then the income can be accumulated over a period of time.
Furthermore, if you are formally established as a charity (with an appropriate Governing Document and Charitable Objects) you can actually register as a charity with HMRC, the Taxman. This means you can claim gift aid on all donations you receive from taxpayers and this amounts to an extra 25%. So, if you get a £10 donation and your donor completes a Gift Aid declaration then you can claim another £2.50 from HMRC. Suddenly, the £5000 doesn’t seem quite so far away.
It is important to set up properly with right Governing Document (GD) for your organisation and make sure you get the all-important Charitable Objects worded just right to comply with charity law. When you have done this then take your GD into a High Street bank and open a bank account, but whatever you do, don’t ask for a charity account! If you do they will ask for the Register Number and you don’t yet have one and you can’t get one until you have an account with £5k, and so the vicious circle continues. So, what you need to ask for is a Community or Treasurer’s account and then this can be converted into a Charity Account in due course.
With a bank account of course, you protect your donations and make everything transparent for yourself and your supporters. As the Commission wants to see income and not just a balance of £5k you can operate your charity as you would when you’re registered, so you can spend income on your charitable aims without fear that it will damage your ability to provide evidence of the £5000. And when you have your £5000 income you can just attach bank statements with your application to the Commission and meet that key criteria.