It is important to remember that there are no blanket exemptions from UK tax for charities. Charities can take several different legal forms, including companies, unincorporated associations and charitable trusts. Charitable corporations and unincorporated associations will be subject to corporation tax, and charitable trusts will be subject to income tax. Depending on the circumstances, charities may also be liable for VAT and NICs, and subject to PAYE obligations. The registration, payment and filing obligations and deadlines described above in respect of the relevant taxes will therefore apply equally to charities.

However, charities may be able to benefit from certain reliefs or exemptions (described below) which are not available to other taxpayers. Whether a charity can benefit from such reliefs or exemptions would need to be assessed on a case-by-case basis. The rules can be quite complicated, and advice may need to be taken.

Irrespective of the charitable aims and purposes of an organisation, broadly, it will not be considered a “charity” for UK tax purposes (and hence will not be able to benefit from any tax reliefs or exemptions available to charities) unless it meets the requirements for 'recognition' as a charity by HMRC, and is so 'recognised'. To be recognised by HMRC, the charity must be:

• registered with the Charity Commission (or another similar regulator outside the UK);
• based in the UK or EU;
• established for a charitable purpose only; and
• run by fit and proper persons.

Charities must make an application to HMRC for recognition. Further details are available here and here. The discussion below applies only to charities which are so recognised.

More generally, HMRC guides to the taxation of charities are available here.

Corporation Tax and Income Tax

Although charities are not exempt from UK corporation tax or income tax, there are various reliefs which can apply to reduce their tax liabilities. Generally, provided that the relevant receipts are applied solely for charitable purposes, the following will be exempt from UK corporation tax and income tax:

• income or gains earned by the charity in the course of carrying out a primary purpose of the charity;
• most kinds of investment income (such as interest, dividends or royalties);
• income from property held for charitable purposes;
• income from fundraising activities (provided certain further conditions are met and a claim for relief is made).

Where charities earn trading income from activities other than the carrying out of the charity’s primary purpose, or earn certain kinds of 'miscellaneous income' (not listed above), this will, in principle, be subject to tax. However, provided the income is applied for solely charitable purposes, exemptions from tax may be available if the income falls below certain thresholds. Further information is available here.

Certain types of receipt, such as donations, are not generally taxable. Care should, however, be taken where donations are given subject to conditions (for example, a requirement that the charity provide something to the donor in return), as HMRC may take the view that the receipt is not a true donation, and hence that it does not fall outside the scope of corporation tax or income tax (as applicable).

Charities can also generally: