Register charitable entity with HMRC: if you have set up your own charitable company, you will be able to apply for tax relief on income tax, capital gains tax and corporation tax, and take advantage of tax repayments on Gift Aid donations and bank interest. However, before you are able to apply for these tax reliefs, you must ensure that your organisation qualifies as a charity for tax purposes.
Qualifying as a charity for tax purposes: to qualify as a charity for tax purposes, your organisation must:
1. Meet the legal definition of a charity company. Your charity organisation must have been established for charitable purposes and must provide a public benefit. If you have registered your charity with the Charity Commission, you will experience no problems in meeting this condition.
2. Be based in the UK or another qualifying country. Your charity's head office must be located in a country in the European Union or in Iceland or Norway. We can setting up your charitable company in UK, by providing a registered office address in London, or we can provide a legal address for your charitable business in Scotland, or giving you a business address in Northern Ireland.
3. Be registered with a charity regulator. You must have registered your charity business with the Charity Commission or a similar regulator, depending on the location of your charity. We can help to register your charity with a charity regulator in England, Scotland and Northern Ireland. Please contact us for the additional details and further questions.
4. Be run by individuals who will use your charity's funds for charitable purposes.
You can apply to HMRC for recognition as a charity for tax purposes. Before you complete a form, you must read through the basic guidance on "Fit and Proper Persons Test", which will explain the need for you to ensure that your charity's authorised individuals have not been involved in tax fraud or disqualified from taking on the role of a charity trustee. Once you have filled the form, you will need to send it to the charities department of HMRC.
Upon the receipt of your form, the charities department of HMRC will create a record that enables them to recognise your organisation as a charity and process any repayment claims that you make.
You will only be eligible to apply for relief from tax from the date on which HMRC acknowledges your organisation as a charity for tax purposes - this is referred to as the 'effective date' and it will be made known to you when HMRC sends you your charity's reference number.
Once you have received your charity's reference number, you must not assume that your charity company will never have to pay tax. If your charity receives taxable income or gains, you must inform HMRC by completing an annual tax return. You will also need to inform HMRC of any changes to your charity – for example, changes in your contact details, bank account details or authorised officials. If you need to register your charitable company with HMRC, please get in touch with us.