Are Donations Received Taxable Income In The UK?
By
HuutiMoney
If you are looking for an answer to the question of whether donations received are considered taxable income in the UK, you will find your answer in the following blog post as we discuss the assessment of donations, incomes and profits made by charities and if they are supposed to pay tax on the amount every year.
Are Donations Received Taxable Income In The UK?
No, donations received by charitable organisations in the UK are not a taxable income as long as they are registered with the Charity Commission in England and Wales, the Charity Commission for Northern Ireland, or the Scottish Charity Regulator.
Additionally, a charity must fulfil the below-listed conditions to be exempt from tax:
- located in the UK, EU, Iceland, Liechtenstein or Norway
- recognised by HM Revenue and Customs (HMRC)
- registered with the Charity Commission or another regulator
- managed by “fit and proper persons”
- established for the sole purpose of charitable activities
However, there are some exceptions to this rule. For example, if a donor receives something in return for their donation (such as a product or service), then the value of what they received may be considered taxable income. Additionally, if a donor donates to receive tax relief, then the donation may be considered taxable income.
Which Charitable Activities Make Donations Received Tax-Free?
A charity that has charitable purposes or works towards public benefit will be able to qualify for tax-free donations and income. Some of these activities include making contributions to the following areas:
- Poverty alleviation
- Providing or improving education
- Encouraging religious practices
- Providing health services
- Saving lives
- Community development
- Encouraging activities related to the arts or amateur sport
- Protecting human rights
- Maintaining religious or racial harmony
- The protection of the environment
- Providing animal welfare
- The efficiency of the armed forces, police, fire or ambulance services
However, having a charitable purpose alone cannot guarantee that a charity will not have to pay taxes on its income or the donation it receives. The charity should be able to meet the rest of the essential conditions; primarily being based in specific locations in addition to the UK and being recognised by the HMRC.
If you wish to learn more you can find guidance on how to write charitable purposes and public benefit on the Government’s website.
What Are The Other Tax Exemptions And Reliefs For Charities In The UK?
There are several tax exemptions and reliefs extended towards charities in the UK as long as the income or profits gained are used for charitable purposes only. These include the following:
- Donations received through individuals, corporations or the Gift Aid scheme
- Investment income from within the UK or abroad
- Bank or building society interest
- Stocks, wayleaves, legacy income, royalties, Discretionary Trust income
- Renting out land or property
- Profits from the disposal of an asset, such as property or shares
- Purchase of property
Conclusion:
The above discussion clarifies that donations received by charities are not taxable income in the UK. We have also learnt how any form of income by a charity is tax-free as long as (a) it meets the eligibility criteria and (b) the charity uses this income/donation for charitable purposes only.