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Charities and Corporation Tax

There are many tax exemptions available to charities – income from primary purpose trading, property, investments, fundraising and gifts are usually exempt from tax. However, because charities are used to operating tax free it is quite common to forget that corporation tax is still payable on many sources of income.

The following are a few top tips regarding taxable income:

  • You should examine your objects before launching a new source of charitable income to ensure you can undertake it tax free. Tax exemption only applies to income from your primary purpose and not income from wider charitable activity. We recommend very wide objects for this reason.
  • Not all fundraising is tax exempt. There are specific limits, governing the number and type of events that can be held (no more than 15 events of the same type and in the same location per year).
  • Hiring rooms can be income from property and is exempt from tax but the provision of catering, equipment and overnight accommodation that goes with hiring of those rooms is not exempt from tax.

Do not forget the general trading tax exemption, worth up to £50,000 of non-charitable trading income, might assist with some non charitable activities. Smaller charities often find this useful and should be used for the unplanned income.

For further information on Corporation Tax for Charities, please contact Michaela Johns on 023 8046 1256.

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