UoN’s tax status as a charity explained

Published by Impact Magazine (Online) March 12, 2015.

Having been made aware that UoN is registered as a charity during our investigation into its executive management, Impact decided to find out more.

As stated on the ‘Finance’ section of the University of Nottingham’s website, “In common with all UK Universities the University of Nottingham is a charity which, under the charity legislation, is exempt from registering with the Charity Commission”. The University of Nottingham is exempt from Corporation Tax ‘‘in respect of its core activities and teaching. However other activities can be liable to CT and the University of Nottingham does have to complete CT returns’’.

No corporation tax was paid by the University or its subsidiaries in any year since 2010

Therefore, following a Freedom of Information request to the University of Nottingham, Impact can reveal that ‘‘No corporation tax was paid by the University or its subsidiaries in any year since 2010’’. Previous to this, the amount of corporation tax paid by the University or its subsidiaries in 2009 by Harewood Leisure Limited was £86,371.51 and in 2010 £4,435.99 was paid by Nottingham University Industrial & Commercial Enterprises Limited (“Notice”).

According to the University of Nottingham’s 2013 financial statement, the University of Nottingham is registered as a charity. While charities are chargeable to corporation tax, trading and other income of charities can be exempt from corporation tax provided it is used for charitable purposes. The University of Nottingham has also set up subsidiary companies. In general, a charity may set up a company to carry on a trade unconnected with the primary purpose of the charity. Any profits of that company would be liable to corporation tax, but if the company donates all of the profits to the charity under the gift aid scheme, no corporation tax is due.

Due to its charitable status the University benefits from exemptions from Corporation Tax on most of its income

This is verified in section 3.12.1 of a 2013 document produced by HM Revenue & Customs called ‘Charities: detailed guidance notes’: ‘‘when a company makes a qualifying donation to a charity, the amount paid can be set against profits for Corporation Tax purposes. The company can make a claim in its CTSA return to set the amount of the donation against its taxable profits, to the extent that it reduces the chargeable profit to nil’’.

According to a tax professional, such an arrangement is completely in line with the tax legislation and would not be considered tax avoidance as long as it was a legitimate donation which was used for charitable purposes.

UoN’s charity status is regulated by HEFCE, which ensures that it conform with the charity law regarding what activities it carries out.

Karen Page, who works as part of the Freedom of Information department at the University of Nottingham, further explained these figures to Impact:

‘‘I can confirm that the University has charitable status and is regulated by HEFCE, which ensures that we conform with the charity law regarding what activities we can carry out.  Due to its charitable status the University benefits from exemptions from Corporation Tax on most of its income, to enable us to focus our resources on our charitable aims of delivering education and research.

However, a small part of our income does not fall into these exemptions and is known as ‘non-primary purpose activity’ as it is not relating to our primary charitable aim of providing education.  In order to minimise risk to the University’s charitable funds, the Charities Commission state that any such activities that may pose a risk to the charity’s assets must be run through a subsidiary company.  If any taxable profit is generated in the subsidiary, this is gifted to the University so we can use it for the public good according to our charitable aims’’.

A member of staff directed Impact towards ‘Nottingham Life Cycle’ in which the University has raised a significant amount of money for charity. This initiative involves Vice-Chancellor Professor Sir David Greenaway leading a cycling challenge. Last year was the fourth year in which this took place; the 1,400+ mile challenge was in aid of Children’s Brain Tumour Research and raised £750,000.

The University of Nottingham was provided opportunity to comment.

Yasemin Craggs Mersinoglu 

Image from moneymagpie.com

 

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