Question 1

Do UK charities have to pay tax?

Accepted Answer

Charities pay taxes such as VAT and income tax on staff salaries but do not pay tax on most types of income as long as they use the money for charitable purposes.

Question 2

When do charities have to pay tax?

Accepted Answer

A charity may need to pay tax if it has received income that does not qualify for tax relief or has spent any of its income on non-charitable purposes.

Question 3

Do community interest companies (CICs) pay tax?

Accepted Answer

Community interest companies (CICs) are taxed in the same way as normal companies, including being subject to Corporation Tax and VAT. They are not eligible to claim Gift Aid.

Question 4

Do charities get business rates relief?

Accepted Answer

Charities receive a mandatory 80% discount on their business rates bill. The local council may increase this so that the charity does not have to pay business rates, which is called discretionary relief.

Question 5

Do charities have to submit tax returns?

Accepted Answer

A charity must complete a tax return if it has income that does not qualify for tax relief or if HMRC asks it to submit one.

Question 6

What is form ChV1?

Accepted Answer

Form ChV1 is used to tell HMRC about changes to authorised officials, responsible persons, nominees, bank account details and other minor details.

Question 7

Can I claim tax relief on UK charitable donations?

Accepted Answer

Donations by individuals to charities or to Community Amateur Sports Clubs (CASCs) are tax-free. The tax benefit goes to you or the charity depending on whether you donate through Gift Aid, payroll giving, land, property or shares, or in your will. This also applies to sole traders and partnerships.

Question 8

Are charitable donations tax-deductible for UK companies?

Accepted Answer

Companies can claim tax relief on charitable donations by deducting the value of the donations from their total business profits before tax.

Question 9

What charitable donations can a company get tax relief on?

Accepted Answer

A limited company pays less Corporation Tax when it gives money, equipment or trading stock, land, property or shares, employees on secondment or sponsorship payments to charity.

Question 10

Do charities pay VAT?

Accepted Answer

Charities pay VAT on all standard-rated goods and services they buy from VAT-registered businesses. They pay VAT at a reduced rate of 5% or at the zero rate on some goods and services.

Question 11

What VAT exemptions do charities get?

Accepted Answer

Certain supplies by charities are exempt from VAT, meaning no VAT is charged and VAT is not recoverable. Exemptions include areas such as advertising, fuel and power, disability aids, construction, talking books, drugs and chemicals, rescue equipment, medicinal products, resuscitation models, medical and scientific equipment and lifeboats.

Question 12

Do charities have to register for VAT?

Accepted Answer

A charity must register for VAT with HMRC if its VAT taxable turnover is more than £85,000. It can choose to register if it is below this threshold, for example to reclaim VAT on its supplies.

Question 13

Are there VAT reliefs for charity fundraising events?

Accepted Answer

Fundraising events may be VAT exempt if they are clearly organised and promoted primarily to raise money for the benefit of the charity or qualifying body, and people attending or participating are aware of this primary fundraising purpose.

Question 14

Do charity events qualify for VAT relief?

Accepted Answer

Fundraising events may qualify for VAT relief, but social events that incidentally make a profit and semiregular or continuous activities such as frequently operating a shop or bar do not fall within the VAT exemption.

Question 15

Do charities pay VAT on advertising?

Accepted Answer

The supply of advertising to a charity is zero-rated. This zero rating covers advertisements on any subject, including staff recruitment.

Question 16

Can charities claim VAT relief on goods connected with collecting donations?

Accepted Answer

A charity can buy pre-printed collecting boxes, envelopes and appeal letters at the VAT zero rate. Low-cost lapel stickers, emblems and badges that a charity gives in acknowledgement of a donation can also be zero-rated.

Question 17

Do charities get VAT exemption for disability aids?

Accepted Answer

Supplies to charities of certain goods and services that the charities make available to disabled people for their personal or domestic use are zero-rated.

Question 18

Is charity building work zero rated?

Accepted Answer

The construction of buildings, and certain works to protected buildings, intended to be used solely for non-business purposes or as a village hall or similar can be zero-rated, subject to specific criteria being met.

Question 19

Do charities pay VAT on fuel and power?

Accepted Answer

Charities pay VAT on fuel and power but can claim the reduced rate for qualifying use, for example for dwellings, certain residential accommodation or charitable non-business activities such as free day care for disabled people. Deliveries of certain small quantities of fuel and power are automatically treated as being for qualifying use.

Question 20

Can you claim VAT on charity donations?

Accepted Answer

Financial or other support in the form of donations or gifts that are freely given and secure nothing in return are outside the scope of VAT. A taxable supply is not created where only an insignificant benefit is provided in return.

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