Section 485: Exemption for property income etc
1489.This section sets out the exemption from corporation tax for property income and certain trading income arising from land, provided the income is applied to charitable purposes. It is based on section 505(1) of ICTA. The corresponding rule for income tax is in section 531 of ITA.
1490.The exemption applies if the income is chargeable to tax under either Part 3 or Part 4 of CTA 2009. Subsection (1) deals with income chargeable under Part 3 of CTA 2009 and subsection (2) with income chargeable under Part 4 of CTA 2009.
1491.There is no requirement for the trade to be exercised in the course of carrying on a primary purpose of the charitable company. Instead, the exemption applies if the income derives from land vested for charitable purposes. But if some of the land is vested for charitable purposes and some vested or held for other purposes (for example, as an investment to generate income for non-charitable purposes) it is necessary to allocate the profits of the single property business between the two parts. This reflects the approach of the exemption in the source legislation that looks to particular interests in land, rather than to one overall property business.
1492.This makes the effect of the source legislation in section 505(1)(a) of ICTA explicit. There is no other income arising from land and chargeable to tax under Part 3 of CTA 2009 which is exempt under that provision.
1493.Subsection (3) provides an exemption from corporation tax for distributions from a United Kingdom REIT. The corresponding income tax exemption for this subsection is in section 531(2A) of ITA.
1494.The source legislation in section 505(1)(aa) of ICTA refers to exemption under Part 3 of CTA in respect of distributions to which section 121 of FA 2006 (rewritten in section 548) applies. Distributions to which section 121 of FA 2006 applies cannot be taxed as trading income and the reference to Part 3 of CTA has not therefore been rewritten.
1495.Section 505(1)(aa) of ICTA also refers to charging provisions in ITTOIA. These are not necessary for corporation tax and are not included in the rewritten legislation.
1496.The United Kingdom REIT rules are rewritten in Part 12 of this Act.