Understanding your issues
Membership organisations usually offer a range of services to their members. This ‘mutual trading’ arrangement is important as any profits arising from these activities are potentially exempt from corporation tax. However, in our experience Trade Associations are not always aware of this and as a result suffer unnecessary tax. We have undertaken tax planning reviews for a number of Trade Associations to assess the level of profits made on trading services provided to their members and made successful applications to HM Revenue & Customs for these profits to be exempt from taxation. We have made substantial tax savings for our clients running into several tens of thousands of pounds annually.
Having the appropriate structure and procedures in place is important if a Trade Association is to be run well. For one Trade Association client, we undertook a governance review and made recommendations for change to ensure there was a more secure and effective structure from which to launch a merger and new educational services. Likewise, for a niche membership organisation, we advised on a new governance structure to limit director liability, and working closely with the directors and senior management undertook a review of the vision, mission and values to reflect the organisation’s 21st century role.
In our experience, Trade Associations who have more than one income stream tend to be in a stronger financial position than those that don’t. We helped a professional sector Benevolent Association to set strategic priorities to diversify its income base and advised them how to market their services to those in need of them.