Accounting Advise
Who is this for?
This guide is for community schools operating as
- Unincorporated Associations
- Registered Charities
- Charitable Incorporated Organisations (CIO)
- Community interest Companies (CIC)
- Private Limited Companies (Ltd)
Best Practice for Community Schools
- Use a simple chart of accounts to match your activities
- Assign a treasurer or finance officer
- Set budgets for each term/project
- Keep grant agreements and funder reports
- Maintain a petty cash log and receipts
- Reconcile bank accounts monthly
Core Accounting Responsibilities (all structures)
- Keep accurate financial records (income, expenditure, grants, invoices)
- Issue receipts and keep copies
- Track restricted vs unrestricted funding
- Use spreadsheets or accounting software (e.g. Excel, QuickBooks, Xero et al)
- File required returns on time to relevant bodies (see below)
Structure Specific Accounting Advice
Please in the below note the difference between turnover and profit.
Also be aware that the self-employment status for tax purposes is different to the one for insurance purposes. https://www.gov.uk/guidance/check-employment-status-for-tax
- Unincorporated Association
Please note that you have to register your school as a charity, become a CIO, CIC or private limited company once your income is >£5,000. https://www.gov.uk/setting-up-charity/register-your-charity
Unincorporated Associations have no legal status, but still must keep:
- Clear bank accounts
- Income/Expenditure accounts
- (Budget forecasts|)
Some funders may require independent review of finances.
Unincorporated Associations are usually exempt from paying tax unless they trade profitably.
Tip: Create a financial policy to ensure transparency
https://www.gov.uk/unincorporated-associations
- 2. Registered Charity and CIO
If your school is a registered charity but not a CIO, check whether it is also registered as a CIC or Ltd Company as additional requirements apply (see below).
Registered Charities and CIOs have to file
- Trustees’ annual report
- a set of accounts and
- submit an annual return
Deadlines: all items need to be submitted to the Charity Commission the latest 10 months’ after the end of the financial year
Accounting Thresholds:
- Under £25,000: Simple receipts and payments account
- £25,001 – £250,000: Independent Examination
- Over £250,000: Full accrual accounts and possible audit
Taxes: Charities are exempt from paying tax on income they receive from trading, i.e. community schools that fund themselves through parental fees are exempt.
Furthermore:
- If your school is employing staff, you need to register for PAYE and run a payroll.
- If your school is registered for Gift Aid, claim eligible tax refunds on donations.
- Restricted funds (i.e. any grants you receive) must be accounted for separately.
Tip: use fund accounting software or class-coded spreadsheets
https://www.gov.uk/guidance/prepare-a-charity-trustees-annual-report
https://www.gov.uk/prepare-charitys-annual-accounts
https://www.gov.uk/guidance/prepare-a-charity-annual-return
https://www.gov.uk/claim-gift-aid
https://www.gov.uk/charities-and-tax/pay-tax
https://www.gov.uk/charities-and-tax/tax-reliefs
https://www.gov.uk/guidance/charities-and-trading
- 3. Community Interest Company (CIC) and Private Limited Company (Ltd)
The accounting requirements for a CIC are the same as those of ordinary limited companies plus the CIC report:
- Annual accounts and confirmation statement (i.e. information about your school) with Companies House.
- Corporation tax on trading profits: file Corporation tax return CT600 with HMRC, 12 months after year end
- CICs only: Submit annual CIC Report CIC34 explaining community benefit
Accounting format: Usually standard profit and loss, but should also track public benefit
Tip: Use cost centres for projects to prove community impact (CICs only)
If your school’s turnover is >£90,000, you need to register for VAT.
Deadlines:
- File annual accounts with Companies House the latest 9 months after your school’s financial year ends.
- Pay Corporation Tax or tell HMRC that your school does not owe any the latest 9 months and 1 day after your ‘accounting period’ for Corporation Tax ends.
- File a Company Tax Return with HMRC the latest 12 months after your accounting period for Corporation Tax ends.
Furthermore:
- If your school is employing staff, you need to register for PAYE and run a payroll.
- If your school pays the directors, properly document their remuneration, i.e. Salaries & dividends.
Tip: Keep directors’ loan accounts separate to avoid penalties
https://www.gov.uk/government/publications/corporation-tax-company-tax-return-ct600-2015-version-3
https://www.gov.uk/guidance/confirmation-statement-guidance
https://www.gov.uk/government/publications/form-cic34-community-interest-company-report
https://find-and-update.company-information.service.gov.uk/accounts/cic/before-you-start
https://www.gov.uk/register-for-vat
https://www.gov.uk/submit-vat-return
Recommended Tools
- Free/Low-cost accounting software
- Wave Accounting (free)
- QuickBook for Nonprofits
- Xero for small businesses
- Spreadsheets: Use Google Sheets or Excel with templates for:
- Budgeting
- Fund Tracking
- Payroll
- Bank accounts: Use business or charity-specific accounts to separate funds
Additional Materials
- Tax Submission Checklist
- Register for PAYE (if employing staff)
- Keep accurate and digital financial records
- Submit Real Time Information (RTI) payroll reports monthly or quarterly
- If VAT-registered: Prepare and submit VAT returns via MTD-compatible software (Making Tax Digital)
- Retain all records securely for at least 6 years
- Meet all HMRC submission deadlines to avoid penalties
- Sole traders/self-employed (e.g. teachers): prepare quarterly updates and annual tax returns under MTD ITSA
- 2. Sample payroll spreadsheet
- Template for recording employee details, gross pay, deductions (PAYE, NI, pensions) and net pay
- Automated formulas to calculate totals and tax contributions
- Easy to customize for different payroll frequencies
- 3. Payroll Preparation
- Collect employee info (NI number, tax code, contact details
- Calculate gross salary and deductions
- Run payroll using software or spreadsheet
- Generate payslips
- Submit RTI (Real Time Information) reports to HMRC digitally