As a charity you don’t pay tax on most of your income and gains if you use it for charitable purposes - this is known as ‘charitable expenditure’.
This includes tax:
- on donations
- on profits from trading
- on rental or investment income, eg bank interest
- on profits when you sell or ‘dispose of’ an asset, like property or shares
- when you buy property
To get tax relief you must be recognised by HM Revenue and Customs (HMRC).
Community amateur sports clubs (CASCs) get different tax reliefs.
When you do pay tax
Charities pay tax on:
- dividends from UK companies
- profits from developing land or property
- purchases - but there are special VAT rules for charities
You must pay tax on any money you don’t use for charitable purposes. This is known as ‘non-charitable expenditure’.
You must complete a tax return if your charity needs to pay tax or if HMRC asks you to.
You can claim back tax that’s been deducted, eg on:
- donations (this is known as Gift Aid)
- bank interest