Academies and Corporation Tax

Academies and Corporation Tax

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Hope you can help with this….will there be any chance that an academy school will be liable to corporation tax on any trading-type activities? As a charity it would normally be exempt, but what if it is generating other income from sources such as lettings, providing services to other schools such as support, mentoring, etc

I think that the lettings would be exempt in accordance with s485 CTA 2010 but not sure about the other income as it's services provided to other schools. Would s480 cover this?

Does anyone have experience on this?

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By George Attazder
23rd Sep 2011 10:40

Normal charity rules apply

Income from property, ie letting for community use, will be exempt under S.485 as you say.

The types of income you refer to would be regarded as trading income.  There are two exemptions for trading:

Exemption for trades exercised in the course of carrying out the charitable activity. This would cover the sale of uniforms, etc and school canteens and tuck shops, for example.Exemption for "small" trades and miscellaneous incoming resources. This may cover the activities you refer to, but remember the limit is 5% of total incoming resources, subject to a minimum of £5,000 and maximum of £50,000.  It might be worth your while ring-fencing these activities in a trading subsidiary and then gift-aiding the net profit within 9 months of the year-end.

As you're probably aware, there are a multitude of VAT issues for academies.  In particular though, make sure they get their electricity and gas, etc lower-rated, as this will ensure that they don't also pay climate change levy.

You should also make sure that the academy is getting maximum business rates relief.  It may previously have got relief (either because it was a VA school, or because discretionary relief was applied for).  Charities are entitled to 80% mandatory relief, and non-profit making bodies providing education (among other things) can apply for discretionary relief to top-up any mandatory relief to 100%.

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