Charity reliefs from income and corporate taxes

There is no general overriding tax exemption for income or gains for charities. They are, however, given exemption from the following specific sources of income:

  • profits or gains arising in respect of rents or other receipts from an estate, interest or right in or over any land (whether situated in the United Kingdom or elsewhere)
  • distributions from Real Estate Investment Trusts
  • investment income (both UK and overseas income), including company distributions
  • non-trading gains on intangible fixed assets (including royalties)
  • income from public revenue dividends on securities which are in the name of trustees, to the extent that the dividends are applicable and applied only for the repair of:
    • any cathedral, college, church or chapel, or
    • any building used only for the purposes of divine worship
  • trading profits where the trade is exercised in the course of the actual carrying out of a primary purpose of the charity or where the work in connection with the trade is mainly carried out by beneficiaries of the charity
  • profits from a lottery, providing it is promoted and conducted with a lottery operating licence
  • income from fundraising events and
  • non-charitable trade profits and miscellaneous income which qualify to be treated as ‘small-scale’.

In the case of investment income and gains, the exemption is available provided that the assets are held, and the income is applied, for charitable purposes – for more information, see Income from Property, Investment Income and Capital Gains Tax Relief.

There are additional exemptions specific to each tax regime required to recognise different income types peculiar to income tax or corporation tax. However, it is beyond the scope of this document to include an exhaustive list of exemptions.

In order for a charity to be recognised by HMRC as qualifying for the tax reliefs, HMRC requires that the charity be:

  • based in the UK, the EU, Iceland, Liechtenstein or Norway
  • established for charitable purposes only
  • registered with the Charity Commission or another regulator if applicable and
  • run by ‘fit and proper persons’.

A charity may register with HMRC using its online service.

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