Income and Corporation Taxes Act 1988

505 Charities: 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—

[F1 (a) exemption from tax under Schedules A and D 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;]

(b) exemption from tax under Schedule B in respect of any lands occupied by a charity F2 ;

(c) exemption—

(i) F3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F4 (ii) from tax under Case III of Schedule D,

(iia) from tax under Case IV or V of Schedule D in respect of income equivalent to income chargeable under Case III of that Schedule but arising from securities or other possessions outside the United Kingdom,

(iib) from tax under Case V of Schedule D in respect of income consisting in any such dividend or other distribution of a company not resident in the United Kingdom as would be chargeable to tax under Schedule F if the company were so resident, and]

(iii) from tax under Schedule F in respect of any distribution,

where the income in question forms part of the income of a charity, 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;

[F5 (d) exemption from tax under Schedule D 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 Schedule D in respect of the profits of any trade carried on by a charity [F6 (whether in the United Kingdom or elsewhere)], if the profits are applied solely to the purposes of the charity and either—

(i) the trade is exercised in the course of the actual carrying out of a primary purpose of the charity; or

(ii) the work in connection with the trade is mainly carried out by beneficiaries of the charity.

[F7 (f) exemption from tax under Schedule D in respect of profits accruing to a charity from a lottery if—

(i) the lottery is promoted and conducted in accordance with section 3 or 5 of the M2 Lotteries and Amusements Act 1976 or Article 133 or 135 of the M3 Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985; and

(ii) the profits are applied solely to the charity’s purposes.]

[F8 (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.]

(2) M4 Any payment which—

(a) is received by a charity from another charity; and

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

(c) is not chargeable to 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 chargeable to tax under Case III of Schedule D but shall be eligible for relief from tax under subsection (1)(c) above as if it were an annual payment.

(3) M5 If in any chargeable period of a charity—

(a) its relevant income and gains are not less than £10,000; and

(b) its relevant income and gains exceed the amount of its qualifying expenditure; and

(c) the charity incurs, or is treated as incurring, non-qualifying expenditure;

relief shall not be available under either subsection (1) above or section [F9 256 of the 1992 Act] for so much of the excess as does not exceed the non-qualifying expenditure incurred in that period.

(4) In relation to a chargeable period of less than 12 months, subsection (3) above shall have effect as if the amount specified in paragraph (a) of that subsection were proportionately reduced.

(5) In subsection (3) above “relevant income and gains” means—

(a) income which apart from subsection (1) above would not be exempt from tax together with any income which is taxable notwithstanding that subsection; and

(b) gains which apart from section [F9 256 of the 1992 Act] would be chargeable gains together with any gains which are chargeable gains notwithstanding that section.

(6) M6 Where by virtue of subsection (3) above there is an amount of a charity’s relevant income and gains for which relief under subsection (1) above and section [F9 256 of the 1992 Act] is not available, the charity may, by notice to the Board, specify which items of its relevant income and gains are, in whole or in part, to be attributed to that amount, and, for this purpose, all covenanted payments to charity (within the meaning of [F10 section 347A(7)]) shall be treated as a single item; and if within 30 days of being required to do so by the Board, a charity does not give notice under this subsection, the items of its relevant income and gains which are to be attributed to the amount in question shall be such as the Board may determine.

(7) Where it appears to the Board that two or more charities acting in concert are engaged in transactions of which the main purpose or one of the main purposes is the avoidance of tax (whether by the charities or by any other person), the Board may by notice given to the charities provide that, for such chargeable periods as may be specified in the notice, subsection (3) above shall have effect in relation to them with the omission of paragraph (a).

(8) An appeal may be brought against a notice under subsection (7) above as if it were notice of the decision of the Board on a claim made by the charities concerned.

Textual Amendments

F1 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)

F2 Repealed by 1988(F) s.148and Sch.14 Part Vfrom 6April 1988.

F3 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)

F4 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)

F5 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)

F6 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)

F7 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)

F8 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)

F9 Words in s. 505(3)(5)(b)(6) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290(1), Sch. 10 para. 14(31) (with ss. 60, 101(1), 171(1), 201(3))

F10 Words in s. 505(6) substituted (with effect in accordance with s. 74 of the amending Act) by Finance Act 1995 (c. 4), Sch. 17 para. 7

Modifications etc. (not altering text)

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

C2 See the following sections of this Act:—s.86—employees seconded to charities.s.235and 237—disallowance of relief, and charge at additional rate, on income from stripping distributions etc.s.332—relief in respect of premises held by a charity or ecclesiastical corporation for use as official residence of clergyman or minister.s.507—exemption of the Trustees of the National Heritage Memorial Fund; and exemption of the Historic Buildings and Monuments Commission for England;s.660—dispositions of income for short periods.s.682(1)—application of 1988 Part XV Ch.III (income under revocable settlements, etc.)where settlement trustees are trustees for charitable purposes.s.683 to 685—tax on income under certain settlements.s.704—cancellation of tax advantages from certain transactions in securities.s.733—interest and dividends on securities purchased and resold.

and see—1989 s.94and Sch.11 para.15—deep gain securities.1990 s.56and Sch.10 para.21—exemption for convertible securities held by charities.Charities Act 1960 (c.58) s.5 (construed as in ss.45and 46)—effect of registration as a charity in England and Wales and s.9 (in Part II Vol.5)—exchange of information with other government departments and local authorities.

Marginal Citations

M1 Source—1970 s.360(1)

M2 1976 c. 32.

M3 S.I. 1985/1204 (N.I.11).

M4 Source—1986 s.30(1)

M5 Source—1986 s.31(1), (2), (3)(c), (d)

M6 Source—1986 s.31(7)-(9)