Readers’ forum: Charitable accounting

We act for a registered charity whose main object is to provide sporting facilities for youngsters. The charity is not registered for VAT.

Some time ago the charity built a sports pavilion on Ground A. The sports pavilion has a bar and a function room which is hired out. A separate company was formed to conduct the trading activities of the bar and hire of the function room. The company is registered for VAT. The company’s net profit is gift aided to the charity.

Ground A also has cricket and football pitches which are hired out. There is no option to tax exercised on the grounds and this income and expenditure (mainly ground maintenance) has always been accounted for in the charity.

The local council has provided a purpose-built youth centre and cricket and football pitches on Ground B which has now become the main centre...