Charities and Corporation Tax
Generally, limited companies and some unincorporated organisations are liable for Corporation Tax on their taxable profits. Some charities may also be liable for Corporation Tax.
This page should help you decide if your charity is liable for Corporation Tax and what you need to do if it is. It will also help you work out if your charity or any of its activities may be exempt from Corporation Tax.
On this page:
- What activities are exempt from Corporation Tax?
- When your charity may be liable for Corporation Tax
- Trading profits and Corporation Tax
- Tax and charity subsidiary trading companies
- Different tax and VAT treatment of some activities
- More useful links
Activities carried out by charities are not subject to Corporation Tax requirements, provided any income generated from those activities arises from or is applied to charitable purposes. This is known as being 'exempt' from Corporation Tax deadlines and requirements.
Exempt activities of charities include:
- trading profits generated where those profits arise from and are applied to charitable purposes
- profits from any fundraising events provided that those profits are applied to charitable purposes
HM Revenue & Customs (HMRC) defines charitable purposes as carrying out the primary purpose of the charity and/or directly serving the beneficiaries of the charity.
Generally, if you meet the various HMRC requirements, your charity is not liable for Corporation Tax and you don't need to complete a Company Tax Return.
If your charity receives income or has a capital gain that's not exempt from tax, you must tell HMRC. You should also tell HMRC when you use income for any non-charitable purposes.
If your charity's activities are not exempt, your charity may be liable for Corporation Tax. If your charity is liable for Corporation Tax, you must tell HMRC that it's liable, pay any Corporation Tax due and file a Company Tax Return on time. For example, you may need to file a return if your charity carries on a trade as well as its charitable activities.
Trading or business activities of charities - including those carried out by a related or subsidiary limited company - may be subject to Corporation Tax deadlines and requirements. But there are some exemptions.
Charities can set up subsidiary companies to carry out trading on their behalf. This may make it easier to separate activities that are liable for Corporation Tax from those that aren't.
In some circumstances the tax and VAT treatment of your charity's activities will be different.