HMRC has updated its guidance for when charities need to complete a tax return. It explains the importance of always filing tax returns within the time limits to avoid incurring a penalty even if there is no tax to pay.

If an organisation is recognised as a charity for UK tax purposes, it may qualify for a number of tax exemptions and reliefs on income and gains, and on profits for some activities. In order to claim these it is necessary to apply on form ChA1 to HMRC Charities for recognition as a charity for tax purposes.

However this doesn’t mean that charities never pay tax. If a charity receives taxable (non-exempt) income or gains it is obliged to advise HMRC and complete a tax return - either Self-Assessment or Company Tax Return depending on whether the charity is set up as a charitable trust or company.