Corporation Tax

Treasury written question – answered on 8th September 2014.

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Photo of James Wharton James Wharton Conservative, Stockton South

To ask the Chancellor of the Exchequer

(1) what recent representations he has received on the level of the threshold for corporation tax exemption for charities and unincorporated associations;

(2) if he will raise the threshold for corporation tax exemption for charities and unincorporated associations.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

There is no restriction on the level of charitable trading a charity may carry out, and any profits are exempt from tax so long as the profits are used for wholly charitable purposes. When charities carry out non-charitable trading, there is a corporation tax exemption so long as the trading receipts are no more than £50,000 a year and represent no more than 25% of the charity’s incoming resources.

Charities that wish to carry out non-charitable trading above these limits can set up and trade through a subsidiary trading company, which protects the charity from the possibility of trading losses. The subsidiary can then use corporate Gift Aid to pass any profits back to the parent charity without incurring a corporation tax charge.

There is a similar exemption from tax on trading income for community amateur sports clubs, which is currently set at £30,000. The Government has announced this threshold will be raised to £50,000, to align with the charity small-scale trading exemption.

The Government has no further plans to raise these thresholds which allow charities to undertake small scale non-charitable trading without the administrative burden of setting up a trading subsidiary. However, as with all reliefs and exemptions, we continue to keep the exemption for small-scale trading under review.

Unincorporated associations are taxed as companies and have no specific corporation tax exemptions. In the same way as other companies, they are chargeable to corporation tax and are eligible for the same reliefs.

The only exception to this rule concerns clubs and unincorporated organisations with very small tax liabilities, which are run exclusively for the benefit of their members and whose annual corporation tax liability is not expected to exceed £100. In this case, HMRC will treat the organisation as dormant.

With regards to the representations received on these matters, Treasury Ministers and officials receive and consider a wide variety of representations from organisations in the public and private sectors as part of the process of policy development and delivery.

The Treasury publishes a list of ministerial meetings with external organisations. This is available online at:

https://www.gov.uk/government/collections/hmt-ministers-meetings-hospitality-gifts-and-overseas-travel

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