Income and Corporation Taxes Act 1988

505 [F1 Charitable companies]: general. U.K.

(1) M1 Subject to subsections (2) and (3) below, the following exemptions shall be granted on a claim in that behalf to the Board—

[F2 (a) exemption from tax [F3 under Parts 3 and 4 of CTA 2009]F4 . . . in respect of any profits or gains arising in respect of rents or other receipts from an estate, interest or right in or over any land (whether situated in the United Kingdom or elsewhere) to the extent that the profits or gains—

(i) arise in respect of rents or receipts from an estate, interest or right vested in any person for charitable purposes; and

(ii) are applied to charitable purposes only;]

[F5 (aa) exemption from tax [F6 under Parts 3 and 4 of CTA 2009], or under Parts 2 and 3 of ITTOIA 2005, in respect of distributions to which section 121 of the Finance Act 2006 (Real Estate Investment Trusts: distributions) applies to the extent that the distributions—

(i) arise in respect of shares vested in a person for charitable purposes; and

(ii) are applied to charitable purposes only;]

F7 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) exemption—

(i) F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F9 [F10 (ii) from tax under section 299 of CTA 2009 (non-trading profits in respect of loan relationships),

[F11 (iizza) from tax under Part 9A of CTA 2009 (company distributions),]

(iiza) from tax under Chapter 5 of Part 10 of that Act (distributions from unauthorised unit trusts),

(iizb) from tax under Chapter 7 of that Part (annual payments not otherwise charged),]

(iia) F12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F13 (iiaa) F14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F15 (iib) F16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]]

[F17 [F18 (iic) from tax under Part 8 of CTA 2009 in respect of non-trading gains on intangible fixed assets,]]

(iii) F14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

where the income in question forms part of the income of a [F19 charitable company], or is, according to rules or regulations established by Act of Parliament, charter, decree, deed of trust or will, applicable to charitable purposes only, and so far as it is applied to charitable purposes only;

[F20 (d) exemption from tax F21 . . . F22 . . . in respect of public revenue dividends on securities which are in the name of trustees, to the extent that the dividends are applicable and applied only for the repair of—

(i) any cathedral, college, church or chapel, or

(ii) any building used only for the purposes of divine worship;]

(e) exemption from tax under [F23 Part 3 of CTA 2009]. . . in respect of the profits of any trade carried on by a [F24 charitable company][F25 (whether in the United Kingdom or elsewhere)], if the profits are applied solely to the purposes of the [F24 charitable company] and either—

(i) the trade is exercised in the course of the actual carrying out of a primary purpose of the [F24 charitable company]; or

(ii) the work in connection with the trade is mainly carried out by beneficiaries of the [F24 charitable company];

[F26 (f) exemption from tax under Schedule D F27 . . . in respect of profits accruing to a [F28 charitable company] from[F29 a lottery if the profits are applied solely to the charitable company's purposes and—

(i) the lottery is an exempt lottery within the meaning of the Gambling Act 2005 by virtue of Part 1 or 4 of Schedule 11 to that Act;

(ii) the lottery is promoted in accordance with a lottery operating licence within the meaning of Part 5 of that Act; or

(iii) the lottery is promoted and conducted in accordance with Article 133 or 135 of the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985.]]

[F30 (1AA) In subsection [F31 (1)(c)(iib)]“relevant foreign distribution” means any distribution of a company not resident in the United Kingdom [F32 which is not chargeable under Chapter 2 of Part 10 of CTA 2009.]]

[F33 (1A) In subsection (1)(d) above “public revenue dividends” means—

(a) income from securities which is payable out of the public revenue of the United Kingdom or Northern Ireland;

(b) income from securities issued by or on behalf of a government or a public or local authority in a country outside the United Kingdom.]

[F34 (1B) For the purpose of subsection (1)(e)—

(a) where a trade is exercised partly in the course of the actual carrying out of a primary purpose of the [F35 charitable company] and partly otherwise, each part shall be treated as a separate trade (for which purpose reasonable apportionment of expenses and receipts shall be made), and

(b) where the work in connection with the trade is carried out partly but not mainly by beneficiaries, the part in connection with which work is carried on by beneficiaries and the other part shall be treated as separate trades (for which purpose reasonable apportionment of expenses and receipts shall be made).]

(2) M2 Any payment which—

(a) is received by [F36 a charitable company] from another charity; and

(b) is not made for full consideration in money or money’s worth; and

(c) is not chargeable to [F37 corporation tax] apart from this subsection; and

(d) is not, apart from this subsection, of a description which (on a claim) would be eligible for relief from tax by virtue of any provision of subsection (1) above;

shall be F38 . . . [F39 chargeable to corporation] tax under [F40 the charge to corporation tax on income] but shall be eligible for relief from tax under subsection (1)(c) above as if it were an annual payment.

[F41 (3) In subsections (4) to (7)—

(a) “charitable expenditure” has the meaning given by section 506,

(b) “relief” means relief or exemption under—

(i) subsection (1) above,

(ii) section 56(3)(c) above,

(iii) section 761(6) below,

(iv) section 256 of the 1992 Act (charities), or

(v) section 46 of the Finance Act 2000 (small trades),

(c) “relievable income and gains” means income and gains which would be eligible for relief or exemption under any of those provisions (disregarding subsections (4) to (6)), and

(d) “total income and gains” means the aggregate of—

(i) relievable income and gains,

(ii) income and gains, other than relievable income and gains, chargeable to tax, and

(iii) donations, legacies and other similar receipts that are not chargeable to tax.

(4) If a [F42 charitable company] incurs (or is treated as incurring) non-charitable expenditure in [F43 an accounting] period, relief shall be disallowed in respect of such amount of relievable income and gains as equals the amount of the non-charitable expenditure.

(5) If in [F44 an accounting] period a [F45 charitable company's] non-charitable expenditure exceeds its total income and gains the excess shall be treated as non-charitable expenditure of the previous period for the purposes of subsection (4); and any necessary adjustments shall be made, whether by making assessments or otherwise.

(6) Subsection (5) may apply to [F46 an accounting] period wholly or partly as a result of the application of that subsection in respect of a later period; but no excess of non-charitable expenditure shall be treated as non-charitable expenditure of [F46 an accounting] period which ended more than six years before the end of the period in which the expenditure was actually incurred.

(7) Where an amount of a [F47 charitable company's] relievable income and gains is disallowed for relief by subsection (4) (whether or not as a result of the application of subsection (5))—

(a) the [F48 charitable company] may by notice to the Board specify which items of income or gains are to be disallowed, but

(b) if the Board requires the [F48 charitable company] to give a notice under paragraph (a) and the [F48 charitable company] fails to comply within the period of 30 days beginning with the date on which the requirement is imposed, the Board shall determine which items to disallow.]

Textual Amendments

F1 Words in s. 505 sidenote substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(10) (with Sch. 2)

F2 S. 505(1)(a) substituted (with effect in accordance with s. 146(5) of the amending Act) by Finance Act 1996 (c. 8), s. 146(2)

F3 Words in s. 505(1)(a) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(2) (with Sch. 2 Pts. 1, 2)

F4 Words in s. 505(1)(a) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(2)(a), Sch. 3 Pt. 1 (with Sch. 2)

F5 S. 505(1)(aa) inserted (with effect in accordance with s. 52(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 17 para. 17

F6 Words in s. 505(1)(aa) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(3) (with Sch. 2 Pts. 1, 2)

F7 Repealed by 1988(F) s.148and Sch.14 Part Vfrom 6April 1988.

F8 S. 505(1)(c)(i) repealed (with effect in accordance with Sch. 7 para. 32, Sch. 41 Pt. 5(2) Note of the repealing Act) by Finance Act 1996 (c. 8), Sch. 7 para. 19(1), Sch. 41 Pt. 5(2) (with Sch. 7 paras. 33-35)

F9 S. 505(1)(c)(ii)-(iib) substituted for s. 505(1)(c)(ii) (with effect in accordance with s. 146(5) of the amending Act) by Finance Act 1996 (c. 8), s. 146(3)

F10 S. 505(1)(c)(ii)-(iizb) substituted for s. 505(1)(c)(ii) (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(4)(a) (with Sch. 2 Pts. 1, 2)

F11 S. 505(1)(c)(iizza) inserted (with effect in accordance with Sch. 14 para. 31 of the amending Act) by Finance Act 2009 (c. 10), Sch. 14 para. 4(2)

F12 S. 505(1)(c)(iia) repealed (1.4.2009 with effect in accordance with s. 1329(1) of the repealing Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(4)(b), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F13 S. 505(1)(c)(iiaa) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 198(2)(d) (with Sch. 2)

F14 S. 505(1)(c)(iiaa)(iii) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(2)(b)(ii), Sch. 3 Pt. 1 (with Sch. 2)

F15 S. 505(1)(c)(iib) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(4)(c) (with Sch. 2 Pts. 1, 2)

F16 S. 505(1)(c)(iib) omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 4(3)

F17 S. 505(1)(c)(iic) inserted (24.7.2002) by Finance Act 2002 (c. 23), Sch. 30 para. 3

F18 S. 505(1)(c)(iic) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(4)(d) (with Sch. 2 Pts. 1, 2)

F19 Words in s. 505(1)(c) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(2)(b)(iii) (with Sch. 2)

F20 S. 505(1)(d) substituted (with effect in accordance with Sch. 7 para. 32 of the amending Act) by Finance Act 1996 (c. 8), Sch. 7 para. 19(2) (with Sch. 7 paras. 33-35)

F21 Words in s. 505(1)(d) repealed (1.4.2009 with effect in accordance with s. 1329(1) of the repealing Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(5), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F22 Words in s. 505(1)(d) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(2)(c), Sch. 3 Pt. 1 (with Sch. 2)

F23 Words in s. 505(1)(e) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(6) (with Sch. 2 Pts. 1, 2)

F24 Words in s. 505(1)(e) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(2)(d)(ii) (with Sch. 2)

F25 Words in s. 505(1)(e) inserted (with effect in accordance with s. 146(5) of the amending Act) by Finance Act 1996 (c. 8), s. 146(4)

F26 S. 505(1)(f) inserted (with effect in accordance with s. 138(2) of the amending Act) by Finance Act 1995 (c. 4), s. 138(1)

F27 Words in s. 505(1)(f) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(2)(e)(i), Sch. 3 Pt. 1 (with Sch. 2)

F28 Words in s. 505(1)(f) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(2)(e)(ii) (with Sch. 2)

F29 Words in s. 505(1)(f) substituted (1.9.2007) by Finance Act 2007 (c. 11), Sch. 25 paras. 1, 23(2); S.I. 2007/2532, art. 2 (with art. 3)

F30 S. 505(1AA) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 198(3) (with Sch. 2)

F31 Words in s. 505(1AA) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(3) (with Sch. 2)

F32 Words in s. 505(1AA) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(7) (with Sch. 2 Pts. 1, 2)

F33 S. 505(1A) inserted (with effect in accordance with Sch. 7 para. 32 of the amending Act) by Finance Act 1996 (c. 8), Sch. 7 para 19(3) (with Sch. 7 paras. 33-35)

F34 S. 505(1B) inserted (with effect in accordance with s. 56(2) of the amending Act) by Finance Act 2006 (c. 25), s. 56(1)

F35 Words in s. 505(1B)(a) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(4) (with Sch. 2)

F36 Words in s. 505(2)(a) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(5)(a) (with Sch. 2)

F37 Words in s. 505(2)(c) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(5)(b) (with Sch. 2)

F38 Words in s. 505(2) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(5)(c), Sch. 3 Pt. 1 (with Sch. 2)

F39 Words in s. 505(2) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 198(4) (with Sch. 2)

F40 Words in s. 505(2) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 174(8) (with Sch. 2 Pts. 1, 2)

F41 S. 505(3)-(7) substituted for s. 505(3)-(8) (with effect in accordance with s. 55(5) of the amending Act) by Finance Act 2006 (c. 25), s. 55(1)

F42 Words in s. 505(4) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(6)(a) (with Sch. 2)

F43 Words in s. 505(4) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(6)(b) (with Sch. 2)

F44 Words in s. 505(5) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(7)(a) (with Sch. 2)

F45 Words in s. 505(5) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(7)(b) (with Sch. 2)

F46 Words in s. 505(6) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(8) (with Sch. 2)

F47 Words in s. 505(7) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(9)(a) (with Sch. 2)

F48 Words in s. 505(7) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 94(9)(b) (with Sch. 2)

Modifications etc. (not altering text)

C1 S. 505 modified (3.5.1994) by Finance Act 1994 (c. 9), s. 171

Marginal Citations

M1 Source—1970 s.360(1)

M2 Source—1986 s.30(1)