CHARITIES

How can an organisation become recognised as a Charity

To be able to claim that an organisation is a Charity, it needs to have been recognised by HMRC as a charity for tax purposes.

To decide whether or not an organisation is a charity, the Registrar of Charities apply tests laid down by the Courts.

Charities are classified into four categories.

All charities must exist solely for the benefit of the public.

1.For the relief of poverty or for the needs of aged and disabled people.

2.For the advancement of education.

3.For the advancement of religion.

4.For other purposes beneficial to the community. (this could include sports and recreation)

STRUCTURE

Charities can be

Companies

Trusts

Associations or societies

Formal documentation required

company limited by guarantee Memorandum and Articles of Association is required

If it is a trust - trust deed.

If it is an association or society – a copy of the constitution.

What are the tax advantages of being recognised as a charity?

A body that is a recognised Scottish Charity will normally be exempt from

income tax,

corporation tax

capital gains tax

on most of its income and gains.

ADVANTAGES TO DONORS

Benefits for individual donors are income tax, capital gains tax and inheritance tax relief for giving money or assets.

For companies, there are relief from corporation tax and capital gains tax for giving money or gifts in kind.

Who are the trustees of a charity?

The charity trustees are the people responsible under these rules for controlling the management and administration of the charity, regardless of what they are called.

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Question

All charities must exist solely for the benefit of the public. Under what circumstances might an organisation be awarded charitable status? (4)