Finances & Tax
What are TWFS’s assets and liabilities?
In an accountant’s terms we don’t have any assets at present, except for members’ funds. TWFS has acquired nothing: no property, no computer, no cinema, no equipment, no filing cabinets. We have no long-term liabilities, because we haven’t borrowed money (and we don’t intend to).
And income and expenditure?
Our expenses are considerable, falling under these approximate headings:
- Hire of the cinema screen per night (which includes the cost of hiring the film and the cost to the cinema of screening it)
- Courier costs where the distributor charges extra for delivering the film reel(s) to the cinema and returning it (them)
- Society administration (e.g. new and renewed membership), communications (e.g. film notes on the night), leaflets and other publicity (posters, etc.)
- Hosting of this web site (at around £29 p.a. one of our lowest costs).
Our income, on the other hand, is simply deposit account interest which usually amounts to around £30.
But haven’t you forgotten members’ subscriptions?
No, for this reason: you’ll remember that we said, in the “Legal status" page, that TWFS is nothing more than its members. Your year’s dues to TWFS are therefore not payment to a separate body which would have to treat them as revenue contributing to profit. Members are simply pooling their funds with other members, and the pooled funds continue to belong to the members. In short, members’ subcriptions are not, in IR terms, income.
If our income is peanuts but our expenses considerable, then ... er ...?
You've got it! Members’ funds (source: your annual subscriptions) pay the society’s expenses.
So what tax does TWFS pay?
Though we are not in legal terms a company (we are not registered as a company at Companies House), the Inland Revenue has a different definition of the word, which includes TWFS as ‘an unincorporated association’ and — would you believe it? — therefore subject to the tax on real companies, Corporation Tax. This is automatically taken off by the bank. (Once upon a time the first £10,000 of income was exempt from tax, but a former and long-serving Chancellor changed that: all income is taxable.)
As subscriptions to TWFS are not revenue contributing to profit, TWFS’s only taxable income at present is that deposit account interest we talked of above. On the other hand, our expenses are far more so there is no profit to tax anyway.
So we have no demands for corporation tax. It’s inconceivable with our present arrangements that we ever shall have. Better still for your Treasurer, we do not have to send accounts to the Inland Revenue once a year. They will, however, wish to review the position after 5 years, in 2008-09. We shall probably forestall this by sending them our 2007-8 accounts, assuming that they are approved at the AGM in October or November 2008.
Have you got this in writing?
Yes. We had a letter from the Inland Revenue in 2003, confirming the essential points above.
We also sent them the Constitution adopted at our October 2004 AGM, with the accounts approved then. In December 2004 they confirmed in writing that our tax position remains unchanged.
Is TWFS solvent?
Yes, though we must always watch carefully and seek like-minded new members, as our annual costs are more or less predictable, whereas annual contributions to members’ funds are, of course, closely related to the number of members renewing or joining.
For the past few years member members’ funds have been falling as (a) we raised our payments to the cinema to more realistic levels and (b) membership numbers predictably fell following the high enthusiasm of our first 2-3 years. In the last 2-3 years we have been increasing subscription rates slowly and pushing to achieve higher membership with the intention of reaching broad balance by 2010 at the latest.
In 2007-8, our numbers increased significantly, but we must persist.
And if the members’ funds run out ...?
There is no immediate danger of this. It’s the committee’s job to anticipate and forestall such a misfortune, and our reserves are at present well above the minimum that we believe to be necessary. Catastrophes ignored, of course.
What value for money will I see, as a member?
It depends how much you use the club and watch our films.
Let’s say you are a single member. If you come to all 13 films then you will more or less break even over the year. For a couple, the picture is slightly better; for a family, better still.
All artificial, of course. If you use your membership as most of us do, you will spend more money than you used to, because you will go to the cinema more often. But you’ll go to see the films which, we hope, you prefer to see, because that’s why you joined. And perhaps you will save money on some other films that you no longer bother with, because you find the TWFS diet so very satisfying. (We have twice surveyed membership opinion on a number of questions, including particularly the quality of our films. The average response has consistently been somewhere between “Good” and “Excellent”. [Surely that means that TWFS should put on lousy films to help members to reduce their cinema-going costs? Ed.]
Lastly we should mention that some find it worth paying the annual subscription to see just a few films in the year, but the ones that they REALLY want to see, that they are most unlikely to find in any other Somerset cinema and very probably further afield.
© The Wells Film Society 2004-8