It is a common misconception that charities, including Scout Groups, do not pay tax. However, this is not the case. A Scout Group could be liable to pay both VAT and direct tax, depending on the size and type of income, costs and the specific circumstance the Group faces.
Some of the VAT and direct tax rules can be complex and separate guidance can be found in appendix 1 of this guide.
As a general rule Scout Groups will not have a large enough income to be VAT registered. This means it is unlikely they will ever be able to reclaim VAT expended.
Investment income
Scout charities are exempt from UK tax on most types of investment income, including income from investments made overseas, as long as the income is used for charitable purposes only. This includes interest and dividend income as well as rents received.
Trading
Any profits that your Group makes from trading activities – selling goods and services to customers, including members – may be taxable. However, there are some important exemptions: A ‘primary purpose’ trading exemption, where a charity carries on a trade as a means of fulfilling its charitable objectives the surpluses are exempt from tax. Charging members to participate in activities and trips could be classed as ‘trading’, but if surpluses arise, they are exempt from tax under the ’primary purpose’ trading exemption. This exemption extends to trading, which is ancillary to our charitable objectives, including things such as the sale of uniform items. This exemption will cover the majority of regular Scouting activities. More information is available on the HMRC website.
