The public benefit test

For exemption from corporation tax on trading profits charities must ensure that the profits are derived from a trade 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). A charitable purpose is one which appears in the list of charitable purposes in section 3(1) of the Charities Act 2011 and is for the public benefit:

  • the prevention or relief of poverty
  • the advancement of education
  • the advancement of religion
  • the advancement of health or the savings of lives
  • the advancement of citizenship or community development
  • the advancement of the arts, culture, heritage or science
  • the advancement of amateur sport
  • the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
  • the advancement of environmental protection or improvement
  • the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage
  • the advancement of animal welfare
  • the promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services and
  • other purposes which are recognised as charitable under existing law or may reasonably be regarded as analogous to any of the above.

For the purposes of tax reliefs, HMRC applies the tests in the 2011 Act even where the charity is registered in Scotland or Northern Ireland.

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