Is there corp tax on 'not for profit' company?

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Client has a company limited by guarantee where M&A forbid dividends and specify that any surplus on winding up must go to charity. Objects are to promote cultural events in a certain locality. Income is from local authority grant, sponsorship from commercial businesses, event ticket sales and donations via crowd-funding. Is net profit subject to normal corporation tax or are there exemptions for, perhaps, grants and donations?? Does anyone have experience of this?

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By WhichTyler
13th Nov 2019 15:02

If there's trading (sponsorship and ticket sales), there's a potential liability for CT even for registered charities...

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By Gone Sailing
13th Nov 2019 20:57

I have always assumed that 'not for profit' was a way of inviting income from grants and sponsorship, and not a CT exemption on the occasional low profits.

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By jwgrogan
13th Nov 2019 18:31

It depends on what you spend the money on, not where it comes from.

As a charity you don’t pay tax on most of your income and gains if you use it for charitable purposes - this is known as ‘charitable expenditure’.

This includes tax:
on donations
on profits from trading
on rental or investment income, eg bank interest
on profits when you sell or ‘dispose of’ an asset, like property or shares
when you buy property

To get tax relief you must be recognised by HM Revenue and Customs (HMRC).

You must pay tax on any money you don’t use for charitable purposes. This is known as ‘non-charitable expenditure’.

Charitable purposes are defined here:
https://www.gov.uk/government/publications/charitable-purposes/charitabl...

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Replying to jwgrogan:
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By The Dullard
13th Nov 2019 18:39

HMRC guidance is a poor substitute for the law. It does depend very much on where it comes from (and in some case how much it is), particularly where the charity isn't a charity at all, but is just required to donate any surplus on a winding up to a charity.

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Replying to jwgrogan:
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By Gone Sailing
13th Nov 2019 18:48

The OP's question isn't a charity.

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Replying to Gone Sailing:
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By jwgrogan
13th Nov 2019 19:01

No, but it might apply to be recognized as one if its activities fell within, say, purpose 8 of that list.

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Replying to jwgrogan:
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By WhichTyler
13th Nov 2019 20:45

jwgrogan wrote:

This includes tax:
...
on profits from trading
...

... on some (primary purpose) trading...

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By nick farrow
14th Nov 2019 15:57

are you allowed to make an accrual or provision for charitable expenditure?

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Replying to nick farrow:
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By WhichTyler
14th Nov 2019 16:10

the usual rules apply, there has to be an actual liability at balance sheet date. You can't just 'accrue to breakeven' (and this isn't a charity)...

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