Chapter 2.1: Definition of a charity for tax purposes
2.1.1 The Taxes Acts set out 4 conditions for ‘a body of persons or trust’ to be a charity for tax purposes. These are that the organisation:
- is established for charitable purposes only
- meets the jurisdiction condition
- meets the registration condition
- meets the management condition
A ‘body of persons’ includes companies, unincorporated associations and other groups.
2.1.2 A ‘body of persons or trust’ is established for ‘charitable purposes only’ if it was set up by a governing, or founding, document that restricts its purposes to those detailed in section 2 of the (England and Wales) Charities Act 2006. The organisation must be established in an EU member state or a country listed as a relevant territory in regulations.
2.1.3 For an organisation to be ‘established for charitable purposes only’ it must be restricted by its governing document to using all its income and assets for its stated charitable purposes.
2.1.4 To satisfy the jurisdiction condition the organisation must be subject to the control of a court in the exercise of that court’s jurisdiction with respect to charities. In the UK this is the High Court, the Court of Session in Scotland or the High Court in Northern Ireland. In a relevant territory outside the UK this means a court with a corresponding jurisdiction.
2.1.5 In order to meet the registration condition, an organisation that’s required to register with a charity regulator under the law of the territory in which it’s established must be so registered. So, for example, an organisation in England that’s required to register with the Charity Commission must be so registered to meet the registration condition.
2.1.6 The management condition is concerned with the propriety of the persons who have control and management of the organisation (the managers). There’s more guidance available on the fit and proper persons test.
2.1.7 Further details on the charitable tax exemptions can be found in Annex I of these guidance notes.
2.1.8 For a charity to be able to take advantage of the Gift Aid Scheme, other giving schemes and the charitable tax exemptions, and to be able to make claims for repayment of tax, it must register online so that HM Revenue and Customs (HMRC) Charities can decide whether it satisfies the relevant conditions and set up the appropriate records.
Chapter 2.2: Organisations required to register with a charity regulator
2.2.1 If a body is required to register with a charity regulator it must do so before applying to HMRC for recognition as a charity for tax purposes.
2.2.2 The Charity Commission has responsibility for the regulation of charities in England and Wales that are required to be registered under the Charities Act 1993 (as amended by the Charities Act 2006). The Charity Commission can advise an organisation whether it’s required to register with them. More information about the Charity Commission is available on the Charity Commission website.
2.2.3 The Office of the Scottish Charity Regulator (OSCR) has responsibility for the regulation of charities in Scotland. All bodies wishing to act as charities in Scotland must register with OSCR. More information about OSCR is available on the Office of the Scottish Charity Regulator website.
2.2.4 The Charity Commission for Northern Ireland (CCNI) is responsible for the regulation of charities in Northern Ireland and began registering charities in December 2013. Charities in Northern Ireland must first register with the CCNI before applying to HMRC. More information about CCNI is available on the CCNI website.
2.2.5 Other relevant countries (member states and those listed in regulations) may have their own charity regulators and it’s the responsibility of the organisation to ascertain whether registration is required.
2.2.6 Once an organisation has registered with an appropriate regulator it can make an application to HMRC for recognition as a charity for tax purposes.
Chapter 2.3: Organisations not required to register with a charity regulator
2.3.1 If your organisation is excepted or exempt from registration or if your organisation is established in a country where there’s no charity regulator you may apply directly to HMRC for recognition as a charity for tax purposes.
Chapter 2.4: Organisations refused registration by a charity regulator
2.4.1 Because the definition of charitable purposes for tax purposes is the one set down by the Charities Act (England and Wales) 2006 it’s possible that an organisation refused registration by a charity regulator outside England and Wales may still be able to satisfy the conditions in the Taxes Acts and be recognised as a charity for tax purposes.
2.4.2 If you want HMRC to consider whether your organisation is a charity for UK tax purposes, please register online.
Chapter 2.5: When HMRC has considered your application
2.5.1 If HMRC Charities is satisfied that the organisation is established for wholly charitable purposes and satisfies the other conditions they will:
- allocate a charity tax reference number for use on all correspondence and claims
- write and advise you of their decision and your charity tax reference
- explain how to find and use the Gift Aid claim forms
2.5.2 If HMRC Charities isn’t satisfied that an organisation satisfies the conditions to be recognised as a charity for tax purposes, they will write to you and explain their decision and arrange, if necessary, for a tax record to be created at the appropriate office.
Chapter 2.6: Other information
2.6.1 If the charity changes its name, the trustees must notify HMRC Charities as soon as possible using form ChV1 HMRC Charities change of details form. If the charity is a company it should include a copy of the Certificate of Incorporation of Change of Name. If the charity isn’t a company it should include the minutes of the meeting of the trustees at which the name change was adopted.
2.6.2 If the charity trustees or managers change or if the bank account details change, HMRC should be notified as soon as possible using form ChV1.
2.6.3 It’s important that any relevant changes are notified to HMRC on form ChV1 at least 1 month before a claim using the new details is made so that they can change your charity’s records and make any repayment using the new details.
2.6.4 If you have any further questions about charitable status you should telephone the HMRC Charities Helpline.
Chapter 2.7: Authorisation of agents for charities
2.7.1 Charities and Community Amateur Sports Clubs (CASCs) can appoint tax advisers to deal with HMRC regarding their tax affairs. Complete and submit Form 64-8 ‘Authorising your agent’ to give HMRC authority to communicate with your agent about the tax affairs of your organisation. Post your completed form to:
Charities, Savings and International 2
HM Revenue and Customs