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If you work for a charity or a non-profit organisation and you require assistance regarding your tax liability, then PD Tax can help.

Charitable bodies do not enjoy a complete exemption from tax, however they are entitled to their own specific tax exemptions and reliefs.

Some of the tax issues that we can consider include:

  • Donations
  • Investment income
  • Gains on the sale of assets
  • Gifts
  • VAT issues
  • Availability of reliefs and exemptions
  • The structuring of supporting trades and property

This list is not exhaustive, and we would be delighted to assist you with any queries you may have in relation to charity tax matters.

We appreciate that it is important for trustees of charities to understand the risks when it comes to tax. With this in mind, when providing advice we are sensitive to this requirement and will ensure that all potential risks are highlighted and planned for.

The Problem

PD Tax were engaged to provide tax advice to a charitable company regarding the sale of the TV channel rights to a third party ie the disposal of intangible assets.

The Solution 

The third party wished to buy the channel rights via an acquisition of shares in a new company.

Therefore our client needed to transfer the rights down to a new subsidiary company before selling the shares of ‘Newco’.

The hive-down of the asset to Newco could be done tax neutrally because it was between group companies.  However, the key parts of the advice were whether a de-grouping charge would apply on Newco leaving the group and whether there was a taxable gain on the sale of Newco shares by Charity co.

The Result 

The legislation is very complicated in this area but the outcome was:-

  • That a de-grouping charge would apply to Newco but that it should be possible for the charge to be elected back to the Charity company.  The reason that this is beneficial is that the charity may be eligible for the exemption for non-trading gains on intangible fixed assets to relieve the de-grouping charge.
  • The deal was structured so that when the intangible asset rights were transferred down to Newco, this was done in exchange for shares.  Thus this provided base cost in the Newco shares equal to the market value and no gain arose.  Even if base cost was not achieved for the shares then it was possible for charity co to benefit from the exemption for capital gains.

We also advised the charity on how it should account for the transaction, provided advice about how it should be disclosed on their tax returns and about the joint election with the Purchaser.

Built into the SPA were indemnities protecting our client should the de-grouping charge be elected back to us and for whatever reason tax ended being paid on the charge.

Contact us today to discuss your tax requirements.
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