The Coronavirus pandemic has not only endangered the health of the UK, but it has also had a huge impact on the economy. This financial strain has led to many people choosing to give up/use some of their income to support: 1) Businesses or employers; or 2) Charities. But what are the tax implications of these acts of generosity? Supporting a business or an employer People are showing support for a business or an employer in several ways such as: 1) waiving salary or bonuses before they are paid; 2) waiving dividends; or 3) giving salary or bonuses back to a business or employer after they have been paid. The tax treatment of this support depends on which route is taken (i.e. 1, 2 or 3). 1. Waiving salary or bonuses before they are...

Reports from Charity Tax Group confirm that HM Revenue & Customs has issued letters to 3,000 charities with the largest Gift Aid claims requesting that they submit a tax return as part of a compliance review. In addition to this, a random sample of several hundred community amateur sports clubs will also be required to submit a return. The purpose of the return is to show the exemptions that the charity is claiming and to determine whether any tax is due. Where you fail to submit the tax return on time, HMRC may issue a penalty. When must a charity submit a tax return? A charity must submit a tax return where it receives income that does not qualify for tax relief, or if HMRC asks you to. A charity must submit a Compan...

What is a charity? In order for an organisation to be legally recognised as a charity in England and Wales, it must be: Established for "charitable purposes" only; and Be subject to the control of the High Court's charity law jurisdiction. 1. What is a "Charitable Purpose"? A charity will have a charitable purpose where it is set up to benefit society. Typical charitable purposes include: relieving poverty; advancing education; protecting the environment; advancing religion; animal welfare; and protecting human rights. An organisation will not have a charitable purpose where it has a political purpose, where the purpose is unlawful or against public policy, or intended to serve a non-charitable purpose. Furthermore, t...

Often when making a donation, a charity will ask whether Gift Aid can be claimed on the donation. There are certain tax advantages and reliefs to making Gift Aid donations, which are explained in more detail below. Basic Operation of Gift Aid Gift Aid is a tax incentive that allows UK registered charities (and charities registered in other EU member states, Norway, Iceland, and Liechtenstein) to claim the basic rate tax (currently 20% in 2018/19) back on the donation from HMRC. For example: Assume a taxpayer wishes a charity to receive a total of £100. The taxpayer will actually give the charity £80 and the charity will then claim back the £20 from HMRC. Tax Relief – Higher Rate/Additional Rate Taxpayers Further tax reli...

The taxation of charities differs from that of other types of organisation. In addition to being subject to specific tax obligations, charities are also eligible for a number of tax reliefs. This blog will offer an insight into the obligations that exist, the reliefs that are available, and how to make a claim. What is a charity for tax purposes? According to HMRC, in order to be able to claim for tax relief a charity must be: Based in the UK, EU, Iceland, Liechtenstein, or Norway; Established solely for charitable purposes. HMRC defines this as being for the public benefit and relevant activities include education, saving lives, and relieving poverty; Registered with the Charity Commission or another regulator; and Run ...

In the Budget 2018, it was announced that the government is set to introduce a package of measures aiming to reduce the administrative burdens on charities. Key changes include: 1. Increase in Small Trade Exemption Charities that undertake small-scale trading activities that do not relate to their primary purpose may qualify for relief under the "Small Trade Exemption". Where this relief is available, income falling within the limits will be exempted from corporation tax. From April 2019, the Small Trading Tax Exemption limits will be increased as follows: Current Limits Annual Charity Income Maximum non-primary purpose trading Under £20,000 £5,000 £20,001 - £200,000 25% of annual turnover Over £...