What are the circumstances that could trigger a tax return for Charities?

HMRC encourages contributions to charities to help society. People feel good about giving to charities. Tax breaks to charities bring a smile on their face.

If your organisation is recognised as a charity for UK tax purposes, this doesn’t mean that you never pay tax. There are red flags that HRMC looks for that could trigger a tax return. Although charities may be given a number of tax exemptions and reliefs on income and gains, and on profits for some activities, there are some circumstances where charities are still required to submit a corporation tax return.

If your charity enjoys certain taxable benefits you need to let HMRC know and complete a tax return – either Self Assessment or Company Tax Return depending on whether you’re established as a charitable trust or company for tax purposes. If you are recognised as a charity by HMRC you get Income Tax and Corporation Tax exemptions and reliefs or make tax repayment claims to HMRC.

Tax and charitable expenditure

Charities may claim Income Tax and Corporation Tax exemptions and reliefs as long as the money is spent for charitable purposes only and qualify for tax relief. This includes

Gift Aid donations

Payroll Giving donations

Rental income

Interest and other investment income

Capital gains

Profits from charities trading

What are the charitable expenses that count for tax deductions?

There are many types of expenses that don’t meet your charitable-spending goals. Your charity won’t get tax relief on all your incomes and gains. This means you must send a completed tax return to HMRC to disclose the non-charitable expenditure. The charity could end up paying tax for the proportion of incurring non-charitable expenditure.

Filing requirements of tax returns for charities

HMRC sends some charities that can get the best potential tax returns, but most charities rarely get one. If your charity feels good about paying tax for non-charitable expenditure or for other reasons, all you need to do is to fill in the tax return and supplementary pages and send the completed returns to HMRC Charities.

Interests & Penalties for defective returns

If your charity files a tax return with incorrect declaration or omissions, or miss tax deadline, your incorrect tax return will be assessed with interests and penalties.

Charities should complete the tax return and send to HMRC before the deadline in order to avoid late filing penalties.

Can you file paper company tax returns?

Filing taxes electronically with HMRC is faster, easier and more secure. HMRC is no longer accepting paper Company Tax Returns for accounting periods ending after 31 March 2010.

It is important for charities of all sizes to file the relevant documents electronically in the proper format.

Any charities that have an income of less than £6.5m for the accounting period

Charities that have an income of greater than or equal to £6.5m have to submit their accounts along with their return and computation to HMRC in iXBRL format.

Need to file charity returns online?

Filing taxes online is streamlined and efficient with DataTracks, a global leader in preparing financial statements in XBRL and iXBRL formats for regulatory filings worldwide. With over 18 years of experience, DataTracks has expertly crafted over 60,000 iXBRL statements for HMRC filings in the United Kingdom. Our team of dedicated experts ensures that your annual account filings are not only simple and secure but also backed by a quick turnaround time, incorporating comprehensive iXBRL tagging services for accuracy and compliance.

To get in touch, please write to us at enquiry@datatracks.co.uk.