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Benefits of Charitable Status

Charitable status confers the following benefits for institutions:

Exemption from capital gains tax and from income tax and corporation tax on income other than from trading arising outside the primary purpose of the institution. (All institutions are normally exempt from VAT on the supply of education and research, but may be liable for VAT on trading activities.)
The ability to recover income tax deducted from deeds of covenant and receipts under gift aid.
Exemption from inheritance tax for donors to institutions.
Substantial relief on business rates.

Issues for the governing body to bear in mind in relation to charitable status include the need to:

Apply the property and income of the institution only for recognised and defined charitable purposes.
Act only within their legal powers. If in doubt as to whether actions contemplated may take them outside the law, the governing body should seek expert advice. The ‘principal regulator’ (eg in England HEFCE) and institutional legal advisers are likely to be the obvious choice, although the charity commissioners remain a valuable source.
Take particular care in organising the trading activities of the institution, as these may not be regarded as charitable.
Manage and protect the property of the institution.
Provide information and returns to the charity regulator.

Charities in England are required to include public benefit statements in their annual reports.