Related Links

BrassTax news

Charity begins at home - but not in St Helens

Helena Housing Limited was formed in 2001 (as Housing St Helens Limited) to provide social housing. It became a registered charity in late 2004. Meanwhile it had generated substantial profits from rental income. It claimed exemption from tax on the grounds that it had been a charity before, as well as after, it became registered; and the Tribunal case is of interest in that it highlights both a common misapprehension and a difficulty.

The common misapprehension which the case dispels is that it is only a registered charity which can claim charitable reliefs. In fact, the requirement is (broadly) that you are established for charitable purposes only and that the income or gains in question are applied exclusively for charitable purposes. Certainly, if you are recognized as a charity by the Charities Commission, HMRC will accept in principle that you are capable of qualifying for the relevant reliefs. It should be noted that - because Scots law differs from English law - things may not be quite so straightforward if you are a Scottish charity, dealt with by the Office of the Scottish Charity Regulator; but this will only rarely cause difficulties.

But the fact is that some charities are not registered with the Charities Commission or with OSCR. This may be because the charity is excepted or exempt from registration or because its income is below the income threshold - or if it is established in Northern Ireland where there is at present no regulatory body equivalent to the Charities Commission. Such unregistered charities are still able to access tax reliefs and exemptions but they must establish their charitable credentials with HMRC by submitting details of their governing documentation and charitable objectives and activities.

Thus there may be cases - such as Helena Housing Limited - where it is argued that as a matter of fact the body exists wholly for charitable purposes, applies its funds exclusively for such purposes and is therefore entitled to the relevant tax reliefs.

However (and here's the rub), although it is in principle possible for a body which is not registered to fulfill the criteria required to secure charitable tax reliefs, Helena Housing Ltd also shows how very difficult it is. In a very detailed decision running to over 150 paragraphs the Tribunal gives a full analysis of the statute and case law background to this difficult area before concluding that Helena did not meet the requirements until it changed its governing document and registered as a charity in 2004.

The case will be required reading for any non-registered body seeking charitable exemption and fascinating reading for anyone else.

For help on the taxation of charities please contact us at help@bkltax.co.uk