Welcome tax changes for charities

As of 6 April, charities have been able to earn more money from non-primary purpose trading before paying tax.

Where a charity carries on a trade in fulfilment of its primary purpose charitable objective, so long as the monies earned from that charitable trade are applied in fulfilment of the charity’s charitable objectives, then the charity will not pay tax on that income.

Where, however, a charity generates funds from non-primary purpose trading activities, such as selling Christmas cards, those funds are taxable receipts unless the amounts earned are below certain amounts. These limits are generally referred to as the "small trading tax exemption". Details on the limits can be found in our latest newsletter.

This change means that charities falling within the new increased non-charitable income levels will remain outside the charge to tax and will not have to consider implement a trading subsidiary structure purely for tax-based reasons.

April 2019 saw the introduction of a couple of changes to the Gift Aid rules.  The changes to the donor benefit rules “relevant value” test, which have been consulted on over the last few years, came into effect on 6 April. These new rules will be of relevance to benefits provided by donors making a donation over £100 where the value of the benefit provided may now be 25% of £100 plus 5% of the value of the donation exceeding £100.  A maximum benefit cap of £2,500 applies.

Any change which simplifies the complex tax rules which apply to charities is obviously very welcome.

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