Does your Academy have non-charitable income?

Academies benefit from a charitable exemption from corporation tax on a number of income streams, including:

• Primary purpose trading –  trading that meets the Academy’s charitable objectives. Primary purpose trading also includes trading by beneficiaries e.g. a cafe run by students
• Non charitable trading provided the income does not exceed £80,000 per annum
• Property rental income
• Savings and investments income
• Chargeable gains
• Fundraising events

All of the above is exempt from corporation tax provided the income is applied for charitable purposes.

Whilst the above income streams are exempt, there are a number of activities Academies may carry out that would not be exempt from corporation tax, some of the common non charitable trading activities carried out by Academies are:

• External catering
• Non education service delivery e.g. consultancy, grounds or IT maintenance services
• Sponsorship where the sponsor receives an element of advertising.
• Room hire/lettings where additional services are provided such as:

1. sports facilities (subject to the Articles) 
2. conferencing - with IT equipment, tea & coffee, food etc.
3. car parking
4. Nursery (subject to the Articles)
    

• Overage on property/land sales
• Feed in tariffs

If your Academy is undertaking any of these activities, or any other activity that does not fall within its charitable objectives, within the Academy itself, please get in touch to discuss the options to help mitigate any potential corporation tax exposure.  It is often a default assumption that the only way to mitigate tax is to use a trading subsidiary.  Other options may exist depending on circumstances and a trading subsidiary is not always suitable.

Advice should be sought before putting a subsidiary in place as there are legal, accounting and regulatory requirements to consider apart from tax.