Corporation Tax Act 2010

496 Meaning of “non-charitable expenditure”

(1) For the purposes of this Part a charitable company’s non-charitable expenditure for an accounting period is—

(a) any loss made in the accounting period in a trade carried on by the charitable company unless—

(i) the trade is a charitable trade, or

(ii) the trade is not a charitable trade but profits of the trade arising in the period would be exempt from corporation tax as a result of one of the exemptions in section 480, 483 or 484,

(b) any loss made in the accounting period in a trade, or in a UK property business or an overseas property business, carried on by the charitable company, if—

(i) the loss relates to land, and

(ii) profits of the trade, or income of the business, generated from the land in the period would not be exempt from corporation tax as a result of the exemptions in section 485,

(c) any loss made in the accounting period in a miscellaneous transaction entered into by the charitable company otherwise than in the course of carrying out a charitable purpose,

(d) any expenditure incurred by the charitable company in the accounting period which is not incurred for charitable purposes only and is not required to be taken into account in calculating—

(i) the profits of, or losses made in, any trade, UK property business or overseas property business carried on by the charitable company, or

(ii) the profit or loss made in any miscellaneous transaction entered into by the charitable company,

(e) any payment made in the accounting period by the charitable company to a substantial donor which is treated under section 504(1) or (5) as non-charitable expenditure,

(f) any non-charitable expenditure treated as incurred under section 504(2) as a result of a transaction between the charitable company and a substantial donor,

(g) the amount of any of the charitable company’s funds that is invested in the accounting period in an investment which is not an approved charitable investment (see section 511), and

(h) any amount lent in the accounting period by the charitable company, if the loan is neither an investment nor an approved charitable loan (see section 514).

But anything which falls within more than one of the above paragraphs counts as non-charitable expenditure only once.

(2) An amount may also be non-charitable expenditure for an accounting period as a result of section 515 (excess expenditure treated as non-charitable expenditure of earlier periods).

(3) This section needs to be read with—

• section 479 (meaning of “charitable trade”),

• sections 497 to 501 (supplementary provision in relation to this section, in particular in relation to subsection (1)(d), (g) and (h)),

• sections 502 to 510 (transactions with substantial donors),

• section 511 (approved charitable investments), and

• section 514 (approved charitable loans).