How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4957
Type Your Tax Question Here...
bigduckontax is online now

We are a not for profit voluntary organisation, working in

This answer was rated:

We are a not for profit voluntary organisation, working in the health field, and established ourselves as a limited company, to provide a degree of legal protection.
For several years we operated on an entirely voluntary basis. As we had no income and weren’t actively seeking income there seemed no point in applying to the Charity Commission or HMRC for charitable status.
However, we then became a partner in a health research project and this resulted in a small amount of initial funding, with further small amounts due in future years.
This income was below the level needed to apply for Charity Commission registration so we applied to HMRC for recognition as a charity.
HMRC has now recognised us as a charity for tax purposes. However, the date of recognition means we have a short period when we had received income and only partially expended this while we were still a company but before we were recognised as a charity.
Our current financial year therefore covers three periods i.e. when we had no income, when we had income but were not yet recognised as a charity, and when we were recognised as a charity. When this financial year ends will HMRC:
1. Consider the end of year financial position, when we are a charity i.e. no corporation tax liability.
2. Divide the financial year into the pre and post charity periods for tax purposes i.e. potential corporation tax liability for the pre recognised charity period?
Hello, I'm Keith and happy to help you with your question.

As you are probably aware a charity with turnover below GBP 5K does not have to register with the Charities Commission.

I am of the opinion that this is one of the cases where the trustees should take up the question with HMRC for guidance. HMRC's web site is silent on the matter of taxation of unregistered charities.
Customer: replied 4 years ago.



Thank you. I was trying Just Answer because my own web search hadn't shown anything.


Could I perhaps ask a follow up question, in case we are liable to corporation tax for the period before we were recognised as a charity:


During this period we entered into a contract for the purchase of a website, with payments to be made on a phased basis as the website was constructed. In the event this has meant part was paid during this period before we were recognised as a charity and part has been paid or is due later (by which time we were recognised as a charity). Would the part to be paid later, because it is part of a written contractual commitment, be accruable?


If so, this would be helpful as it would offset most of the income for the potentially taxable period.





Hi Michael

I can see your problem. The general rule is that once you enter a contract a liability for fees is created for the total contract sum. Thus your organisation pre registration would have its tax liability substantially reduced as you suggest.


bigduckontax and other Tax Specialists are ready to help you
Thank you for your support.