Not for profit organisations - Corp Tax?

red_devil Registered Posts: 52 💫 🐯 💫
Hey guys....

Just taken on a client which is a company Ltd by guarantee. Basically a small arts project run on a not-for-profit basis. They did their own CT return last year and paid tax. SHould they be paying corp tax? If not, how do they apply for exemption? Client is NOT a charity by the way.

Any thoughts, advice, comments would be appreciated......



  • deanshepherd
    deanshepherd Registered Posts: 1,809
    A not-for-profit company generally means that profits are not distributed, as oppose to profits not being realised.

    Take a look at their income streams to see what is going to be taxable.

    Most importantly you will want to decide if they are trading (refer to badges of trade) as this will be the main source of taxable income for most companies.

    If they are a membership organisation then you will want to consider whether they are 'mutual-trading' which is exempt from corporation tax. Basically, this means that they are trading with themselves e.g. flat management companies that collect service charges to pay for property maintenance or perhaps for clubs that collect subscriptions to pay for running costs. No sales to anyone external.

    Other income streams, such as bank interest or investment income, are generally always going to be taxable. However, if the main activity is non-taxable (such as a mutual) then HMRC have discretion to dis-apply the requirement to post a return of taxes on minor investment income. There is no application form for this, you can write to the local tax office for consideration of the case.

    I hope that gives you a good starting point.
  • angela27
    angela27 Registered Posts: 40 💫 🐯 💫
    Dean Shepherd that is a very helpful post you have submitted there and better than the previous post of the morning i have nothing but love for you now
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    Aw.. you make me blush..

  • angela27
    angela27 Registered Posts: 40 💫 🐯 💫
    Hey hey as my mother always says its nice to be nice
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