Non-exempt charities: cessation of tax-exempt status

Heading: inserted (with effect on 14 April 2014), on 30 June 2014, by section 128 of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

HR 11 Non-exempt charities: initial tax base
When this section applies

(1)

This section applies on and after the day that a person ceases to meet the requirements to derive exempt income under section CW 41 or CW 42 (which relate to charities) (the date of cessation).

Establishing cost of property

(2)

For the purposes of this Act, for the person, the cost of premises, plant, equipment, and trading stock is the value that would be used at the date of cessation under this Act if section CW 41 or CW 42 never applied.

Consideration for financial arrangements

(3)

For the purposes of this Act, the consideration for a financial arrangement of the person is the value calculated using the following formula:

consideration paid to person + expenditure
− consideration paid by person − income.

Definition of items in formula

(4)

In the formula,—

(a)

consideration paid to person is the consideration that is paid to the person before the date of cessation:

(b)

expenditure is the expenditure that would have been incurred under the financial arrangements rules before the date of cessation:

(c)

consideration paid by person is the consideration that is paid by the person before the date of cessation:

(d)

income is the income that would have been derived under the financial arrangements rules before the date of cessation.

Prepayments

(5)

For the purposes of this Act, the person is treated as having the unexpired portion of expenditure under section EA 3 (Prepayments) and the unpaid amount under section EA 4 (Deferred payment of employment income) that the person would have had if section CW 41 or CW 42 never applied. The unexpired portion is available for deduction under sections DB 50 and DB 51 (which relate to deductions) in the income year that contains the date of cessation.

Information

(6)

For the purpose of applying this section, the person may use information from their annual returns contained on the register of charitable entities under the Charities Act 2005, if they have no other information that is more readily available.

Defined in this Act: charitable purposes, consideration, financial arrangement, financial arrangements rules, income, tax charity, trading stock

Section HR 11: inserted (with effect on 14 April 2014), on 30 June 2014, by section 128 of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).