609 Charities

Summary

This section provides that a gain is not a chargeable gain if it accrues to a charity and is applicable and applied for charitable purposes. “Charity” is defined for the purposes of capital gains tax in section 5 by reference to the meaning of that term in section 208, which gives exemption from income tax in respect of the trading income of charities, and, thus, means any body of persons or trust established for charitable purpose only. Essentially, therefore, any body which qualifies for charity exemption for income tax also qualifies for exemption from capital gains tax. In order to prevent the avoidance of capital gains tax through the use of “time charities”, that is, a charity set up for a limited period at the end of which the assets revert either to the settlor of the charitable trust or to other beneficiaries, section 609 also provides that when the assets so revert they are to be treated as having been sold by the trustees at that time at market value and any gain arising on this deemed disposal is a chargeable gain.

Details

(1) A gain is not a chargeable gain if it accrues to a charity and is applicable and applied for charitable purposes.

When assets held on charitable trust ceases to be subject to the trust, the trustees are deemed to have disposed of and immediately reacquired the assets in question at that time for a consideration equal to the market value of the assets, and any resulting gain is not treated as accruing to a charity, that is, it is a chargeable gain in respect of which the trustees are liable to tax. Furthermore, any earlier gains on disposals of assets by the trustees which have not been applied for charitable purposes become chargeable.

Assessments to capital gains chargeable by virtue of the section may be made at any time within 10 years after the end of the year of assessment in which the assets cease to be subject to the charitable trust.

Relevant Date: Finance Act 2021