Organisations recognised as charities by HM Revenue & Customs (HMRC) may qualify for various tax exemptions and reliefs on income and gains, and on profits for some activities.
Provided income is used for charitable purposes, it is generally exempt from tax. This includes investment income, bank or building society interest, income from letting out land or property and trading activities.
However, recognition as a charity for tax purposes does not mean that the charity will never pay tax. If it does receive taxable income or gains it must inform HMRC and complete a tax return appropriate to its structure, i.e. a charitable trust, unincorporated association, company or charitable incorporated association (CIO).
For example, charities are able to carry out trading activities by selling goods or services directly related to their charitable aims and objectives and to trade as a way to raise funds but depending on the type and scale of the trading activities, the profits arising may be liable to tax.
If your charity is involved in trading activities, Haslers’ charity experts can help you structure these to mitigate tax liabilities, for example by setting up a trading subsidiary, and maximise the value of your income generation. We can also assist with the compliance aspects of completing tax returns or complete these on the charity’s behalf.
To find out more about Haslers’ East London and Essex-based accountancy, tax and business advisory services for charities, please contact us.