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 under Schedules A and D F3 . . . 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;]

[F4 (aa) exemption from tax under Schedules A and D, 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;]

F5 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) exemption—

(i) F6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F7 (ii) from tax under Case III of Schedule D F8 . . . ,

(iia) from tax under Case F9 . . . 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,

[F10 (iiaa) F11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(iib) from tax under Case V of Schedule D in respect of [F12 such dividends as would, in the case of income tax, be chargeable to tax under Chapter 4 of Part 4 of ITTOIA 2005 or such distributions (other than dividends) as would, in the case of income tax, be chargeable to tax under Chapter 8 of Part 5 of that Act so far as it would apply to what would be a relevant foreign distribution,]]

[F13 (iic) from tax under Case VI of Schedule D in respect of non-trading gains on intangible fixed assets under Schedule 29 to the Finance Act 2002, and]

(iii) F11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

where the income in question forms part of the income of a [F14 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;

[F15 (d) exemption from tax under Schedule D F16 . . . 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 F17 . . . in respect of the profits of any trade carried on by a [F18 charitable company][F19 (whether in the United Kingdom or elsewhere)], if the profits are applied solely to the purposes of the [F18 charitable company] and either—

(i) the trade is exercised in the course of the actual carrying out of a primary purpose of the [F18 charitable company]; or

(ii) the work in connection with the trade is mainly carried out by beneficiaries of the [F18 charitable company];

[F20 (f) exemption from tax under Schedule D F21 . . . in respect of profits accruing to a [F22 charitable company] from[F23 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.]]

[F24 (1AA) In subsection [F25 (1)(c)(iib)]“relevant foreign distribution” means any distribution of a company not resident in the United Kingdom which—

(a) is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b) would be chargeable under Chapter 3 of that Part of that Act if the company were resident in the United Kingdom.]

[F26 (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.]

[F27 (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 [F28 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 [F29 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 [F30 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 F31 . . . [F32 chargeable to corporation] 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.

[F33 (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 [F34 charitable company] incurs (or is treated as incurring) non-charitable expenditure in [F35 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 [F36 an accounting] period a [F37 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 [F38 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 [F38 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 [F39 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 [F40 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 [F40 charitable company] to give a notice under paragraph (a) and the [F40 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) 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)

F4 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

F5 Repealed by 1988(F) s.148and Sch.14 Part Vfrom 6April 1988.

F6 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)

F7 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)

F8 Words in s. 505(1)(c)(ii) 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)(i), Sch. 3 Pt. 1 (with Sch. 2)

F9 Words in s. 505(1)(c)(iia) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 198(2)(c), Sch. 3 (with Sch. 2)

F10 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)

F11 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)

F12 Words in s. 505(1)(c)(iib) substituted (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)(e) (with Sch. 2)

F13 S. 505(1)(c)(iic) inserted (24.7.2002) by Finance Act 2002 (c. 23), Sch. 30 para. 3

F14 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)

F15 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)

F16 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)

F17 Words in s. 505(1)(e) 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)(d)(i), Sch. 3 Pt. 1 (with Sch. 2)

F18 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)

F19 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)

F20 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)

F21 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)

F22 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)

F23 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)

F24 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)

F25 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)

F26 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)

F27 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)

F28 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)

F29 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)

F30 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)

F31 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)

F32 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)

F33 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)

F34 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)

F35 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)

F36 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)

F37 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)

F38 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)

F39 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)

F40 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)