Starting a Charity - Some Key Information

by Startacus Admin

Why become a charity

With such strict legislation and regulation it’s hardly surprising that becoming a charity brings with it a number of benefits and exemptions that aren’t open to traditional business, here are some of the key points you may be interested to hear.  

• Exemptions from income or corporation tax on some types of income

• Total exemption from capital gains tax

• Total exemption from stamp duty

• Exemptions on Inheritance tax (allowing people to make them a tax free gift in their will)

• Charities pay no more than 20% of normal business rates on occupied buildings

• Special VAT regulations can be applied in some circumstances

Different Types of Charity

Charities are regulated by the Charity Commission and must register with it once their income exceeds £5000 p.a.  Within the UK they are classified neatly into 4 categories, depending upon what you would like your charity to do.

1) Unincorporated associations - This is normally the simplest way in which to set up a charity and is most appropriate for small organisations or groups of people who wish to work together for one, or a number of charitable purposes but are planning to remain small. The downside of choosing this structure is that you will not have legal status, meaning that the activities of the charity may be restricted.  Typically as an unincorporated association your charity will not be able to employ staff, own land or hold investments in its own name.

2) Charitable Companies - The word ‘company’ is of great significance within this particular structure because in the eyes of the law a company can hold a similar legal status to a person. This means that a charitable company has the ability to own land/property and enter into contracts in its own name rather than through that of its trustees. This, not only allows the charity to grow to a more considerable size than an unincorporated association but also helps to remove liability for the charity’s activities from the trustees. These charities therefore have what is known as ‘limited liability’ meaning that trustees and members will be responsible for a very small amount of any financial liability that charity incurs (normally a figure around £5).  

You may wish to become a charitable company if...continued on page 3

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Published on: 24th February 2014