It is a long perpetuated myth that charities do not pay tax and one that has come to the fore recently with an announcement by HMRC that they are going to be writing to over 3000 Charities, primarily those with the largest gift aid claims to complete a tax return notwithstanding that they may have been previously exempt.It will be in the form of a Corporation Tax return no matter whether their charity is a lmited company, a CIC or unincorporated so if you receive one of these forms you should contact your accountant straight away.The returns must be submitted even if there is no tax due.

This may be seen as a further administrative burden on charities but remember that the only exemption relates to Primary Purpose Trading and a de minimis on non-primary purpose trading. Consequently, if your charity has recently changed some of your sources of income or you are planning to do so, you would be advised to check with your accountant whether or not these changes may impact on your tax status and if so, what you may be able to do to mitigate this.

This table shows how the small trading tax exemption limits are applied:

Charity’s gross annual income

Maximum permitted small trading turnover

Under £32,000


£32,001 to £320,000

25% of your charity’s total annual turnover

Over £320,000