Clients giving money to charity instead of paying my fee?

[JennyGee11]

Hi there business people of mumsnet! I wonder if anyone can help me get clarity on something?

I’m just starting a new side hustle, a service, which people pay a one-off fee for. As background, I’m full-time employed in a totally different sector and my motivation for starting this side business is really for my own enjoyment. I don’t need the money, and because my main employment is so full-on I’d be deliberately minimising the amount of time/number of clients I take on for this small business venture anyway. Like, really, really limiting, think perhaps 10-15 hours of work each quarter (probably one client per quarter).

My costs are not insignificant but I can afford to pay them/have the loss - treating it as costs of doing my hobby really (approx £400 per year).

My motivation is this: since I’m doing this all for my own pleasure, and don’t need the money right now while I’m employed (and also I need the hassle of doing a tax return like a hold in the head..!) can I ask my clients to not pay me, and to give the fee direct to charity instead?

My thoughts are that if I take their money, then by time I’ve paid tax etc and passed it on to charity myself, the charity receive less and I’ve given myself loads of admin hassle in the process. Nobody wins!

However - is it allowed/legal for me to position myself as a free-of-charge supplier and ask clients to give the equivalent sum of money to my fee to charity instead? I’m assuming of course that client and I have similar views on where money should go to and I’m guessing I’d like to see evidence of their payment to said charity!

What do you think? I don’t want to do anything illegal or avoid tax, just want to do good though my efforts. I understand that if this was my full time work I might need to set up as a charity etc but I’m new to this service anyway and really just trying it out, hence treating it as a hobby to see if I like it anyway. I might find I dislike doing it and stop after a year or so.

What do I need to think of and what am I missing? And - if you have accountancy know-how - is this allowed/wrong?

Many thanks in advance for your thoughts!

Jenny

I think it’s crap for the people who have a similar business but need to make money out of it.
I also think you will come across as less professional which might Id might not be an issue for you (depends on the work really).

Yes fair point - I had thought about how it might undermine others who need to do the business for their main source of income.
So I’d decided to not advertise as being ‘free’ (well, wouldn’t be free really because I’d still hope people pay the full fee to charity) so until people actually decided to work with me and committed to doing so, I wouldn’t mention the request. Of course if they didn’t want to, then I’d just have to take the fee really.

Good point though, something to think about. Thanks for your thoughts. 😊

How could you be sure the client have the money to a charity, and how could you be sure they donated the worth of the item, and not just a fiver?

I think you’re being a bit naive expecting your clients to donate your fee to charity. I doubt many would do it.

As another poster has pointed out, you’re also potentially undermining others in the same line of business. If you feel that strongly about not taking money, charge a fee and donate it yourself. That way you know it’s been done.

This is the tricky bit... I wondered if they’d be willing to show a screen shot of the money transfer/PayPal receipt etc. I guess I’d take it on trust that it was a legit receipt etc. All a bit weird though isn’t it - I’d likely have to see how the idea lands with the client and discuss with them.

I really appreciate your thoughts. Just trying to maximise the money a charity receives, yet within the rules, and realising it’s not straight forward (which just seems a massive shame, there will be a lot taken from the fee if I have to receive as income before passing on to charity myself!)

Yes, I agree - am perhaps being naive. I do get that. Just an optimist I guess!

Perhaps better to take the fee and lose 40% to tax or whatever and be 100% sure the rest has been donated to charity because I’d be doing it myself, rather than having difficult conversations and hoping it had actually gone to charity.

If it's voluntary to donate, people won't.

If you enforce it and enforce the rate, then you effectively are receiving payment of that value for your services.

Literally your sole motivation for structuring it that way is to avoid tax - HMRC can unravel that. It's not an effective plan.

Another point is that should you wish to start making money out of this venture (who knows what the future holds), you might well meet some customer resistance to your fees, since they will be used to donating a small amount to charity.

@JennyGee11

Yes, I agree - am perhaps being naive. I do get that. Just an optimist I guess!

Perhaps better to take the fee and lose 40% to tax or whatever and be 100% sure the rest has been donated to charity because I’d be doing it myself, rather than having difficult conversations and hoping it had actually gone to charity.

When you make the charity donation, sign up to GiftAid - then they'll get an extra 25p per £1 you donate. If you are a higher rate tax payer, I think you can also claim some money back yourself (& donate that too, if you wish to).

Thanks @Logistria - I think you’ve given me the answer I didn’t want but needed to hear.... Gosh hate to think of myself as a wannabe tax avoider, I’m trying to do good 😂 But yes - wanting to divert money away from me to a charity it is that isn’t it. Such is life I guess. Hey ho.

Really value your perspective/experience/thought and input - thank you all! 😊

Are you able to say what it is?
Is there a charity that it's an appropriate type of work for you to do a sort of partnership with, so they go through them to get to you? It may help with the undermining and not knowing whether payment had been made?

I don’t think this is a good idea. You’re putting potential clients in an awkward position if they want to work with you but don’t support (as in actively disagree with) the aims of the charity you want them to donate to. I’m assuming you mean you’d want them to donate to a specific charity of your choosing?

Your accountant will advise you, but surely any charitable donations you make are taken into account when your tax liability calculation is made?

Thanks @AdaColeman - you make a good point. I don’t know what the future holds. Might like it so much I try and make it my day job! Though all the while I’ve got a mortgage to pay I’d say it’s unlikely, ha! But yes. Need to think about this.

Have a look at the gift aid scheme, you may well be able to give everything you make from this project and claim the tax back / give it to the charity.

I understand that it feels like a hassle to do a tax return but if you genuinely don’t need the money you are making you could spend a bit of it on an accountant to file for you. Doesn’t have to be all that expensive if it’s just your professional fees and you keep a note of your expenses as you go.

@JennyGee11

This is the tricky bit... I wondered if they’d be willing to show a screen shot of the money transfer/PayPal receipt etc. I guess I’d take it on trust that it was a legit receipt etc. All a bit weird though isn’t it - I’d likely have to see how the idea lands with the client and discuss with them.

I really appreciate your thoughts. Just trying to maximise the money a charity receives, yet within the rules, and realising it’s not straight forward (which just seems a massive shame, there will be a lot taken from the fee if I have to receive as income before passing on to charity myself!)

I'm slightly confused. Do you want to run a business or do you want to run a charity with a trading subsidiary?

Don't forget the value of gift aid. If you are a higher rate taxpayer then your basic rate band gets extended by the grossed up value of your donations.

So the charity gets a government top up on your donation of your basic rate tax and you won't be paying as much higher rate tax as if you hadn't made any donations, which means you'll have more net income... effectively the value of the donation can therefore be gross in the charity's hands if you do your sums right. Without any dodgy schemes from you.

If you take less than £1000 per year there’s nothing to declare.

If you have to do a tax return it’s really easy the hardest part is sorting all the log on info

Can you tie in with a charity and donate the items to them, so that they (the charity) can sell them?

@AwkwardPaws27 thanks, yes will be sure to register for gift aid - that will be better than nothing.

@De88 I’m being a bit vague aren’t I.. sorry. Trying not to be outed I think (overly cautious!) Put it this way, once I have clients I’d only work with them once.

@LetTheBirdsSing yes true re: disagreement about worthy charity. I was thinking something generic, nothing niche or controversial. It was the Ukraine situation that got me thinking of this, someone who will be able to provide humanitarian aid really, to refugees or wherever needs it. It was a nice idea but it seems largely impractical and I wouldn’t want to get in trouble myself for something when I was just trying to do something for good.

It would be more efficient for the client to donate.

Let’s say you charge £1000 and donate it, plus gift aid it, and donate the rebate, the charity gets £1000

If your client instead donates it and gift aids it, and donates the rebate, the charity gets £1200/1400/1600/1450 for the same amount of your work.

I would charge market rate and only bring this up at invoicing time or else you will shaft everyone who actually needs to pay their bills.

Also, you can claim to carry back gift aid donations made in one tax year to the previous one. So as long as you do your tax returns promptly you will have time to calculate the 'right' amount to donate based on your tax rate that year. If you are using an accountant they should be able to help you (but it may mean them spending longer your return and charging you more).

E.g. if you earn the money in the year to 5 April 2022 then calculate your liabilities/ donation amount and actually pay the donation to the charity on say 17 August 2022 - technically you made that donation in the year to 5 April 2023, but you can claim to carry that back and treat it as having happened in the year to 5 April 2022 and put it on that year's return so that all your reliefs and sums work out.

If that makes sense.

I think I’m confusing myself too 😉

I don’t really want to run a business or a charity. I just want to do the thing (the service) which I will be good at/enjoy, and wanted to have someone (ie charity) benefit from the fact that (as someone up thread already mentioned) people will expect to pay for my service and to pay a fee, and might think of me as less as a professional if I don’t charge for my time. So, willing to take a fee if that’s what people expect but hoping to pass it on (easily) to a charity that really needs it, rather than keep it.

To everyone who had pointed out that self assessment is not that hard I know you’re all right! Especially since there are no complex costs involved in this service (literally just my brain and my time!) so all quite easy. Just an admin dodger as you can tell 🤣

Sorry I should have said if you charge £1000, donate your post tax income and gift aid plus donate the rebate the charity get £1000.

@Asdf12345

It would be more efficient for the client to donate.

Let’s say you charge £1000 and donate it, plus gift aid it, and donate the rebate, the charity gets £1000

If your client instead donates it and gift aids it, and donates the rebate, the charity gets £1200/1400/1600/1450 for the same amount of your work.

I would charge market rate and only bring this up at invoicing time or else you will shaft everyone who actually needs to pay their bills.

That doesn't work.

And the donor doesn't get a "rebate" . That's not how gift aid works, so you'd be asking the client to impute their tax relief and pay a higher donation. I doubt that would go down well.

Charities register for gift aid not donors. And they are precluded from claiming gift aid if the donor has received a benefit in exchange for donating, which the clients in that scenario would have done. (If the proposed scheme was effective, which it's not anyway).

@Asdf12345

It would be more efficient for the client to donate.

Let’s say you charge £1000 and donate it, plus gift aid it, and donate the rebate, the charity gets £1000

If your client instead donates it and gift aids it, and donates the rebate, the charity gets £1200/1400/1600/1450 for the same amount of your work.

I would charge market rate and only bring this up at invoicing time or else you will shaft everyone who actually needs to pay their bills.

Yes - exactly this. I was never going to undermine others in the sector who do this and depend on the income. I don’t want that either, that’s not kind or helpful - I can see that. If I made the suggestion Re:charity, it would defo be at invoice time and as I’d only ever work with the client once then it would neither set a precedent or undermine industry colleagues for future, I’d think. And the client would in theory end up parting with just as much money as they would have done if they’d paid me, but maybe they too would feel happy that they had the chance to help others benefit from it at the same time.