Charity Tax Advice & Efficiencies: Charity Tax Law

At Lupton Fawcett, we have a unique understanding and approach when it comes to helping charities with their tax requirements. Our clients find this to be particularly useful as charity tax is a complicated topic as charities have a unique tax status compared to other kinds of organisations.

We are one of the few law firms in the Yorkshire region that specialises in this area. We collaborate with our dedicated Charities & Social Enterprises Group, which works closely with charitable and socially based enterprises and not-for-profit organisations across the region.

Our expert solicitors – based in Leeds, Sheffield and York – are here for you if you would like to discuss your charity’s tax reliefs, exemptions or responsibilities. Call 0333 323 5292 or complete the online enquiry form on this page. Alternatively, you can speak with Julian Moran, the Head of Tax at Lupton Fawcett.

About charity tax

Charities are entitled to relief from tax in certain situations, and to be entitled to these reliefs they must meet certain conditions. They must be:

  • Established for charitable purposes only
  • Run by fit and proper persons – charities must choose a maximum of two authorised officials to manage the charity’s tax, and responsible persons to be legally accountable for running the charity. All of these people must be proven, via the provision of a signed declaration to HM Revenue and Customs (HMRC), to be fit to run the charity
  • Based in the UK, EU, Iceland, Liechtenstein or Norway
  • Registered with the Charity Commission or other relevant regulator, if required to register
  • Be recognised by HMRC and provided with a HMRC charity reference, which can be achieved by using the HMRC’s online service

Tax reliefs

Charities do not have to pay tax on:

  • Donations
  • Profits made when selling or disposing of an asset
  • Property purchases
  • Rental or investment income
  • Profits from trading

If you work for a community amateur sports club (CASC), you are entitled to slightly different tax reliefs, details of which can be found here.

Charities complete a tax return and pay tax on:

  • Profits from developing land or property
  • Dividends from UK companies before 6th April 2016
  • Purchases, although there are different VAT rules for charities that need to be taken into account. More information can be found here
  • Business rate (with an 80% discount) on non-domestic buildings
  • Non-charitable expenditure

In addition, charities are entitled to claim back tax that has been deducted, for example on donations via Gift Aid or on bank interest.

Our services

Our expertise includes advising on:

  • Gifts to charities
  • The new social investment tax relief (for qualifying investments in charities and social enterprises)
  • VAT issues in connection with charities and social enterprises purchasing and developing land such as:
    • disapplication of option to tax
    • potential for zero rating
    • new developments and extensions
    • group VAT registration
  • VAT issues generally
  • Availability of charitable reliefs and exemptions (from income tax, corporation tax, CGT and SDLT)
  • Tax restructuring of activities

Our recent experience includes:

  • Discussing VAT issues with seller in connection with a dis-application of the option to tax (where buyer was intending to convert building to Relevant Charitable Purpose (RCP) use)
  • Advising on ability for a charity to structure activities using a group structure to maintain charitable exemptions for direct tax purposes and enable VAT registration and input VAT recovery for certain income streams
  • Advising on zero rating for construction services and materials in relation to RCP and Relevant Residential Purpose (RRP) buildings
  • Advising on the potential for zero rating for onward supply of an RRP building
  • Advising on 10 year certificate for zero rated and reduced rate building works for RRP or RCP use and advice on change of use of certificated buildings
  • Advising on potential to mitigate VAT on supplies of staff to exempt / non-business entities
  • Advising a community amateur sports club in respect of potential tax liabilities in the context of a proposed disposal of property subject to a historic charitable trust

Contact us

If you would like to speak to our solicitors – based in Leeds, Sheffield and York – about anything relating to charity tax, feel free to get in touch today. Call 0333 323 5292 or complete the enquiry form on this page.

Why Choose Lupton Fawcett?

Having advised and supported many local families, individuals and businesses, we are proud to offer clients a dedicated service from specialist solicitors who are experts in their field:

We're Award Winning

We were awarded the Legal 500 HR/Employment Law team of the year in 2017

We're Connected

We're connected to the people, businesses and infrastructure throughout Yorkshire

We Put You First

You can be sure to expect superb client service from us. Our clients are our priority

We're accredited

Recognised by leading Legal Directories Chambers & Partners and the Legal 500

Frequently Asked Questions

What are the benefits of seeking charitable status?

For the majority of organisations this will mean becoming registered with the Charity Commission.

Charitable status provides tax advantages both for the charity and for the donor tax payers. However, charities are not wholly exempt from tax (as it is sometimes thought) and advice should be taken in specific cases.

Registration with the Charity Commission puts beyond doubt the fact that an organisation is charitable and this may assist an organisation in obtaining funds both from the general public and when applying for grants or securing UK government or EU funding.

There are however some disadvantages to being registered as a charity, though these are mainly administrative. There are strict accounting and reporting requirements. Once registered, an organisation becomes subject to the jurisdiction of the Charity Commission which can investigate the actions of the trustees. Charities are also restricted to carrying out actions which support their objects and accordingly must take care when carrying out certain activities such as trading, fundraising or in some circumstances campaigning.

Are charities obliged to invest their funds ethically?

You must be very careful in relation to investment of a charity’s assets. The Trustee Act 2000 sets out the duties and obligations of trustees in relation to a number of matters including investment. These apply as much to charity trustees as to trustees of private trusts.

In general terms investment should be carried out in such a manner as to maximise the capital and income of the charity. This does not automatically mean that one cannot invest unethically. However, it is important that any decisions concerning investment do not simply reflect a trustees own views on how the charity ought to invest but that they accord with the objects of the charity. Accordingly, if a charity was, for example, an animal welfare charity then it might be appropriate to regard certain types of investment in companies carrying out animal research as demonstrably undermining the objects of the charity. Similarly, certain religious charities may decide not to invest in alcohol, tobacco or gambling. Trustees may, however choose to make use of ethical funds which are now widely available and which may be appropriate for the charity’s circumstances.

In general terms it is important that appropriate investment advice is being taken at all times by the trustee.

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