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Corporation and income tax

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The blanket assertion that charities don’t have to pay tax is not true.

Charities are usually exempt from paying corporation or income tax, but there are some situations where you might become liable, the most common are related to non-charitable expenditure, like:

  • losses on non-primary purpose trading
  • non-qualifying loans – loans that could be seen to be made not in the best interests of the charity (for example, charities have been known to make ongoing interest-free loans to prop up trading subsidiaries) see Charity Tax Group for guidance.
  • payments overseas if you haven’t carried out reasonable checks to ensure the money will be properly spent

There are other situations relating to specific capital spending from investment income, or gains from certain property deals explained by the Charity Tax Group

Corporation Tax Returns

If HMRC ask you to complete a Corporation Tax Return you must respond even if you are not due to pay any tax.  If you do not file a return when due, you will be subject to a fine.

See the guidance at GOV.UK

HMRC Charities Helpline

HMRC have a helpful charities tax team who will deal with your charity specific queries on applying for recognition.

  • Applying for recognition as a charity for tax and Gift Aid purposes 
  • VAT reliefs for charities 
  • VAT reliefs for disabled and older people 
  • Registering as a Community Amateur Sports Club (CASC) 
  • Completing a Company or Trust Tax Return 
  • Gift Aid, Payroll Giving and making a repayment claim 

You can submit an online query or call HMRC Charities Helpline on 0300 123 1073 Monday to Friday, 08.30 to 17.00 

 

Page last edited Jul 16, 2018

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