Tax for Charities shouldn’t be taxing!

A good place to start is the specific exemptions on the taxation of income that are available to charities as long as the relevant criteria are met:

• Primary purpose trading income – where a charity’s activities are solely in pursuance of their charitable activities, as set out in their trust deed or Memorandum & Articles of Association, this income is exempt from tax. The key here, is to ensure that any adaptation to activities is still in accordance with your charitable objects.
• Investment Income – charities can invest Endowed or surplus funds to generate income from which to meet charitable objects in future periods.
• Rental income – may fall under either of 2 exemptions above. If provision of accommodation for a disadvantaged group is part of charitable objects then primary purpose exemption stands, otherwise if properties are rented to generate income to meet charitable objects then investment income exemption stands.
• Small scale non-charitable trading – monies raised from activities which are not part of your charitable objects. This could be merchandise, with the charity’s logo, aids for disabled, upcycling activities, training etc. Where the total annual income, is less than £80,000 (effective from 1 April 2019) this income falls outside the scope to be taxed. The key consideration here, would be to ensure that where any new methods of generating income could fall within this category, the limit is not exceeded. Once it has been exceeded ALL trading income becomes chargeable to tax.