Dáil Éireann Debate, Thursday - 10 March 2022
187. Deputy Darren O'Rourke asked the Minister for Finance the way in which local amateur dramatics groups should manage their financial accounts in order to be tax compliant in the case of large public performances, for example, for amateur dramatics groups that are not set up as companies; and if he will make a statement on the matter. [13689/22]
View answerI am advised by Revenue that where an amateur drama group is in receipt of income, for example, from the sale of tickets to public performances, this could be treated as income from a trade. In general, taxpayers who carry on a trade are “chargeable persons” under the self-assessment system and are required to submit a tax return to Revenue by 31 October of the year following the tax year in question (or by mid-November, if paying and filing through the Revenue On-Line Service).
Whether a trade is being carried on is determined by an examination of the facts of a case and by interpreting those facts in the context of the “badges of trade” and of applicable case law. There is a great variety of possible circumstances so that no fixed formula can be applied to determine whether an activity can be classed as “trading”. However, in the vast majority of cases there will be no doubt about whether the activities constitute trading.
If an organisation such as an amateur drama group meets certain criteria it may apply to the Charities Regulator (CRA) for charitable status. The CRA is responsible for determining whether an organisation’s activities meet the ‘charitable purposes’ test. Further information is available at the CRA website.
Once a charity is registered with the CRA, it can apply to Revenue for charitable tax exemption. I am advised by Revenue that to apply for charitable tax exemption an organisation is required to submit the application form “Charities and Sports Bodies e-application” online through the Revenue Online Service (ROS). The charity’s application for tax exemption must include:
- the entity’s latest financial accounts or details of its financial plans,
- a statement of its activities and plans, and
- a copy of the charity's constitution which has been approved by the CRA.
Once the charity has been granted tax exemption, Revenue will issue a Charitable Tax Exemption Number or CHY Number. The charity does not need to renew its exemption provided it continues to meet the conditions for retaining the exemption.
Once Revenue grants a CHY Number to a charity, it must:
- remain tax compliant,
- maintain its charitable status with the CRA and comply with the Charities Act 2009,
- use all income for its main charitable purpose only,
- keep proper records and accounts,
- submit a copy of its first year’s financial accounts within 18 months of receiving the exemption,
- keep audited accounts if its annual income is over €100,000,
- notify Revenue’s Charities and Sports Exemptions Unit of any change of details, and
- request prior approval from Revenue’s Charities and Sports Exemptions Unit if the charity intends to accumulate funds for more than two years along with the reasons for the accumulation.
Further information on the charitable tax exemption is available on the Revenue Website.
In relation to Value-Added Tax (VAT), the application of VAT to goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the EU Directive provides that supplies of goods and services are chargeable to VAT at the standard rate, currently 23% in Ireland. Under VAT law, traders/businesses are required to register for VAT where their taxable supplies exceed certain thresholds. However, in general, organisations which are not registered and not required to register for VAT, or are not engaged in taxable activities, do not need to charge VAT on their supplies and, therefore, are not entitled to reclaim the VAT they incur on their purchases.
Financial accounts should be prepared in accordance with the ordinary rules and conventions of commercial accounting. To establish the taxable profits for a period of account, in circumstances where the charitable tax exemption does not apply, it may be necessary to make various ‘add backs’ and ‘deductions’ to the pre-tax accounting profits shown by the accounts to comply with rules of computing profits chargeable to income tax. The Taxes Consolidation Act 1997 contains a number of rules related to the calculation of the taxable profits of a trade, and where relevant, these rules apply irrespective of the accounting treatment adopted in preparing the accounts.
All taxpayers, including voluntary organisations must keep full and accurate books records to enable them to complete their tax returns. The specific type of records to be maintained by persons, in order to fulfil their obligations depends on the nature and size of the business. The records must include details of:
- All sums of money spent and received in the course of carrying on a trade, profession or other activity, this includes all sales and purchases of goods and services,
- The assets and liabilities of the trade, profession or other activity,
- The acquisition and disposal of assets, which would be chargeable assets for capital gains tax purposes.
Supporting documentation such as invoices, bank and building society statements, cheque stubs, wages sheets, receipts, etc. should also be retained. Generally speaking, the books and records must be retained for a period of 6 years.
