Income of charities—Tax treatment
B5.820 Charity's profits of trade—general liability
It is settled law that tax is chargeable on the profits or gains of a trade carried on by a charity, irrespective of whether the profits are, and can only be, applied to the purposes of the charity, unless the statutory exemptions (see B5.825 onwards) apply.
Relevant case law
Thus, in St Andrew's Hospital1 a number of paying patients were received into the hospital as well as non-paying patients. It was held that the profit made from the care and treatment of the paying patients was assessable to income tax notwithstanding that it was used to defray the cost of maintaining the other patients. The ground of the judgment was that the exemptions in favour of charities were confined, as they were at that time, to those in what have now become ITA 2007, ss 518–564 (Pt 10) and CTA 2010, ss 466–517 (Pt 11). The case of Psalms and Hymns Trustees2, was decided on the same ground. The trustees carried on the business of publishing and selling hymn books, and the profits were distributable among the widows and orphans of Baptist ministers.
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