Charities (Hansard, 24 March 1977)

§ Mr. Robert Sheldon

I can summarise the fiscal concessions available to registered charities by saying that charitable bodies are generally exempt from income tax, corporation tax and capital gains tax. There are certain other fiscal reliefs available in respect of CTT, local authorities' rates and VAT.

Following is the fuller information: Bodies of persons or trusts established for charitable purposes only are, with one qualification, exempt from income tax, corporation tax and capital gains tax provided the income or gains concerned are applied to charitable purposes only. The qualification relates to profits derived by a charity from trading activities; these profits are only exempt from corporation tax or income tax where the trade is exercised in the course of the actual carrying out of a primary purpose of the charity or where the work on the trade is mainly carried out by the beneficiaries of the charity. In general there are no provisions for income tax relief to a donor for donations made to charities. However, where an individual executes a deed of covenant binding himself to make annual payments to a charity for a period which may exceed six years he can obtain income tax relief, but only at the basic rate, on the amounts so paid; and if a company similarly executes such a deed it can obtain corresponding relief from corporation tax. In practice the donor deducts basic rate income tax from the payments made to the charity and this tax may be retained provided the payer has sufficient income which has been subject to income tax to cover the payment. The charity can recover the tax which has been deducted. Transfers of property given to charities or to be held in trust for charitable purposes only are exempt from capital transfer tax up to a total of £100,000 if made on or within one year of death and are exempt without limit if made earlier. A donor who gives property to a charity is not liable to capital gains tax on the increase in value of that property during the period of his ownership. Where the donor 630W receives a consideration for the asset he will be chargeable only where and to the extent that the consideration exceeds his acquisition cost. Premises occupied by a registered charity and used for charitable purposes, including shops which sell donated goods, qualify for a statutory 50 per cent. relief from local authority rates. In addition, rating authorities may grant further relief up to 100 per cent. at their discretion. Charities enjoy a number of specific VAT concessions in that donated goods, exports of goods for the relief of distress and supplies of services or material specifically used in the charitable business of a charity—such as talking book equipment for the blind, medical treatment, etc.—are zero-rated or exempted from VAT. Otherwise, registered charities are given no special privileges under VAT law. Comparatively few charities make taxable supplies in excess of the registrable limit and have to register and account for tax.