Charities—capital gains tax
Charities—capital gains tax

The following Private Client practice note provides comprehensive and up to date legal information covering:

  • Charities—capital gains tax
  • Definition of charity
  • Charitable purpose
  • Jurisdiction
  • Registration
  • Management
  • Exemption from tax
  • Relief from tax

UPDATE: In his 2015 Budget, the Chancellor indicated changes to the CGT regime. The Budget did not indicate that these changes affect issues raised in this Practice Note. It is not anticipated that the Finance Act 2015 will include any matters that will affect the contents of this Practice Note.

In practical terms a charity has no liability for any gains that it makes but there may be a liability if those gains are not applicable to and applied only for charitable purposes.

On the other side of the coin relief against liability is also available to donors to charity. Therefore if a donor gives an asset to a charity or sells it to the charity at cost it gives rise to neither a gain nor a loss.

Donations have recently gained popularity where it is possible to apply the rules relating to Gift Aid. Capital gains tax paid can be used to cover any liability for the income tax treated as deducted from such donations.

Definition of charity

Logically relief is not available unless a body of persons is a charity. For the purposes of most taxes in order for those persons to qualify as a charity they must satisfy the following conditions:

  1. the organisation must be for charitable purposes

  2. it must meet the jurisdiction criteria

  3. it must be registered

  4. it must meet the management criteria

To all intents

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