Annex 1: Minor changes in the law Change 35: Charitable companies: exemption for profits from fund-raising events: sections 483, 490, 491, 492 and Schedule 1
This change gives statutory effect to ESC C4 (trading activities for charitable purposes).
The concession provides an exemption for the profits of various fund-raising activities which amount to a trade, but which are only undertaken to raise money for charity. The concession does not apply in circumstances where an attempt is made to use it for tax avoidance. To reflect this, the new statutory exemption is subject to the restrictions in section 492.
The fund-raising event has to be of a kind that falls within the exemption from VAT under Group 12 of Schedule 9 to the Value Added Tax Act 1994. This Schedule provides an exemption from VAT for the supply by a charity of goods and services in connection with an event that is organised primarily to raise money for itself or other charities. The Schedule defines “event” and places certain limits on the number of events that a charity can hold in the same location in any given year.
Section 483, in line with the extra-statutory concession, is linked to the VAT legislation to provide consistency in tax treatment.
This exemption is also extended to the bodies listed in section 490 and to scientific research associations (see section 491).
This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with generally accepted practice.