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Charities

There are many tax advantages to setting up a charity, for both individuals and companies. As a registered Charity you can obtain tax relief on:

  • Income Tax
  • Capital Gains Tax
  • Stamp Duty
  • VAT
  • Corporation Tax
  • Rates
  • Inheritance Tax

In addition to the above, you can also take advantage of Gift Aid which is a simple way to reclaim the tax on donations made by the UK tax payer.  Should a donation be made through a UK tax payer and not a company the charity can claim back the basic rate of tax on top of the donation, for example, a cash donation of £100 made by an individual, the charity will be able to claim back their basic rate thus making the donation received by the charity £125.  This is the most tax efficient way of getting money into your charity.

Companies can also donate cash funds to your charity too, but unfortunately, you will not be able to receive Gift Aid.

As well as cash donations, charities can also accept donations through stocks and shares, as well as property which the tax payer will receive tax relief.  Donors of assets, land or shares to UK charities are not liable to capital gains tax, even if the asset is worth more when they donate it than when they acquired it.

If your charity receives taxable (non-exempt) income or gains you need to let HMRC know and complete a tax return – either Self Assessment or Company Tax Return depending on whether you’re set up as a charitable trust or company.

If your charity has business activities the VAT rules will apply to you just as they do for any other business. You may, however, qualify for certain VAT reliefs and exemptions.

However, there are many things to consider before registering your charity like, who will be the trustees as Charity trustees have a variety of responsibilities, which may carry liabilities.

All charities must operate within the constraints of charity law. They have to obey a number of rules, which include regulations covering trustees, accounts, finances and management. Company law also applies to charities run as companies.

They will be responsible for breaches of the law attributable to them in the conduct of their charity. For example, they will:

  • be liable to the charity for breach of their trust or fiduciary obligations under trust or company law
  • be responsible generally for any breaches of the criminal law they commit
  • sometimes be liable under civil law to third parties either for breaches of contract or for infringement of another’s rights

If you are considering registering as a charity, call Tax Expert now and we will give you advice on the best way forward, the advantages and disadvantages of registering as a charity and will guide and assist you through from registering, preparing a governing document and completing the trust deed, which will require signing and dating in the presence of a witness.

For further advice call Tax Expert now for a free consultation on 01772 788200.