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Posted 20th April 2021

3 Tax Tips for Non-Profits

The UK government allows charities, aka non-profits, to use quite a few tax exemptions and benefits to minimise their total due tax amount every year. However, in order to really take advantage of those benefits as a non-profit organisation, the administrative heads should be well aware of what they are in the first place, and which ones their particular organisation qualifies for availing. If you oversee a charity, we have three crucial tax tips to help you with just that.

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3 Tax Tips for Non-Profits
3 Tax Tips for Non-Profits

The UK government allows charities, aka non-profits, to use quite a few tax exemptions and benefits to minimise their total due tax amount every year. However, in order to really take advantage of those benefits as a non-profit organisation, the administrative heads should be well aware of what they are in the first place, and which ones their particular organisation qualifies for availing. If you oversee a charity, we have three crucial tax tips to help you with just that.

No Taxation for Charitable Work: Learn What Qualifies

The biggest tax benefit for non-profits is the fact that they do not need to pay any taxes on a large portion of their income and/or profits at all, as long as that portion is being spent on charitable expenditures. Below, we have listed the expenditures which are considered as charitable by the British government, and would thus be exempted from taxation under the present tax laws governing non-profit organisations:

  • Donation money
  • Interest earned on any type of legally authorised investment
  • Trading profits
  • Capital gains from selling or disposing of stocks, real estate and any other assets
  • Income from renting out property
  • Money used for buying property, which will then be used for a charitable cause

Non-Profits Still Have to Pay Taxes: Learn What Does Not Qualify for Tax Exemption

Even though a big portion of their income and profits are exempt from taxes when used for (qualifying) charitable causes, even non-profit organisations must pay their due taxes in time. Below, you will find a complete list of income and profits that do not qualify for tax exemption, even when the organisation is a charity:

  • The amount is taxable if the non-profit is receiving dividends from British companies formed before 6th of April, 2016
  • Real estate development and associated profits are not exempt from taxation
  • Most purchases made by non-profits are subject to the standard 20% VAT, just like everyone else
  • Cooking gas, fuel (not car fuel) and electricity expenses for charitable accommodation facilities and caretaking facilities can be paid after adding only 5% VAT to the billed amount
  • The above is only applicable if the charitable facility consumes less than or equal to 1,000KW hours of electricity per month

Hire Tax Accountants with Experience in Non-Profit Taxation Laws

The few pointers we have here for you should be able to help you in maximising benefits that the government has in place for non-profit organisations. However, these are by no means comprehensive, meaning that there is still a lot more to learn. That is where tax accountants  like Azets come in. Just mention that you are looking for help with filing taxes as a non-profit organisation, and a tax accountant can arrange a meeting with one of their specialists who cater to the needs of non-profits and other charitable organisations.

Note that community amateur sports clubs, or CASCs also qualify for tax relief, but they are not the same as non-profits. This means that the laws regulating taxation and tax exemption for such organisations are quite different. Be sure to register yourself in the right category, or the entire claim for tax relief might be rejected. It is possible to refile your taxes, but the chances of getting all the exemptions diminish if your first attempt fails. Work with a professional tax consultant to avoid making any such mistakes to begin with.

Categories: Finance, News


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