UK Charities can claim relief from tax on most income or gains and on profits from some activities. Charities can also claim tax repayments on income received on which tax has already been paid including Gift Aid donations from individuals.

Income from investments, estates, land and property.

Charities established in the UK are exempt from tax on most income and gains from investments, estates, land and property so long as that income/gain is used for charitable purposes.

Your charity can arrange to have income received from some of these sources paid to your charity before UK tax is deducted they include:

• bank interest
• income from land including way-leaves and furnished property.
• royalties.

Bank and building society interest received by charities

UK banks and building societies are obliged to make interest payments to UK charities before tax is deducted (gross). If your charity is receiving bank or building society interest after tax has been deducted (net) you can follow this guidance to correct the position.

Bank Interest

• make sure that your bank is aware that you are a UK charity.
• Let the bank see evidence that you have been accepted as a UK charity e.g. your charity registration number or a letter from HMRC Charities confirming that you are a charity for tax purposes.
• Once the bank is satisfied that you are a UK charity they must make all interest payments to your charity gross.

Building society interest

• make sure that the building society is aware that you are a UK charity
• complete form 38(INP). This form must be signed by a charity official (e.g. a trustee, the secretary, treasurer or other officer)
• Let the building society see evidence that you have been accepted as a UK charity e.g. your charity registration number or a letter from HMRC Charities confirming that you are a charity for tax purposes.
• Once the building society is satisfied that you are a UK charity they must make all interest payments to your charity gross.

Interest already received net of tax For the current tax year

• If the bank or building society is already aware that you are a charity and is still deducting tax from your interest they are doing so incorrectly.
• let the bank or building society know about the error
• as long as no Section 352 certificates have been issued they will correct their mistake by re-crediting your account with any tax deducted in error

For earlier tax years

• you can reclaim tax deducted from interest received for earlier years by making a claim to HMRC Charities
• complete claim form R68 and schedule R68F detailing the interest received and the tax which has been deducted at source
• Claims can be made for up to six years back from the current tax year.

Income from Certain fundraising activities

An extra statutory concession (ESC C4) exempts income and profits generated from fundraising events from tax as long as certain conditions are met.

Income from trading

Some charities may have trading activities, either to deliver their charitable objectives or simply to raise funds. There are three separate exemptions available to charities for profits generated by trading activities.

Your charity may also want to consider establishing a subsidiary trading company.

Income received after tax has been deducted

Charities can usually claim back UK tax that has already been deducted from income they receive, including income received by Gift Aid donation. The main exception is non-refundable Tax credits on dividend income.

Repayment Claims

HMRC Charities has a special process for charities to claim repayments without completing a tax return.

If you want to claim repayments in this way you must first contact HMRC Charities, register for tax purposes and provide us with details of your nominated claimant.