We act for many Charities and Voluntary Bodies and this article will look at how we obtain charitable status for our clients and the advantages of doing so. Charitable status means that an organisation is recognised as a charity by the Revenue Commissioners for tax purposes.
In order for your organisation to be recognised as charitable by the Revenue Commissioners, the purpose of your organisation must come under one of the following categories;
- The relief of poverty.
- The advancement of religion.
- The advancement of education.
- Other purposes of a charitable nature which are beneficial to the community.
All charitable organisations that are applying for a tax exemption require a legal structure which must be documented. This requires you to have legal documentation which controls how the charity operates. It might be a constitution or a set of rules. Alternatively it might be a trust deed or company documentation if your charity is set up in this way. There are several types of Governing Instruments that you can use. The one that is best suited to your organisation depends very much on the nature of your charitable purposes, how your activities are funded and the planned activities of the charity.
We at Patrick J Farrell and Company will be able to advise on the various legal structures available to you when setting up your organisation. We will also discuss with you the various advantages and disadvantages of each one.
When applying to be recognised as a charity for tax purposes we will submit:
- A completed application form – Form CHY1
- The Company’s governing instrument (i.e. Deed of Trust or the Company’s Memorandum and Articles of Association).
- A statement of activities of the charity.
- The latest financial accounts.
- The names and addresses of its officers.
The Revenue Commissioners will give exemptions from certain taxes including the following:
- Stamp Duty – Stamp Duty is a tax that arises primarily when there is a transfer of property.
- Income Tax – This is a tax on the charity’s income. However, the Revenue Commissioners will not give an exemption on the salaries paid to staff members of the charity.
- Capital Gains Tax – Capital Gains Tax is a tax charged on the capital gain (profit) made when you dispose of an asset.
- Capital Acquisitions Tax – If you receive a gift, you may have to pay Gift Tax on it. If you receive an inheritance following a death, it may be liable to Inheritance Tax. Both these taxes are types of Capital Acquisitions Tax.
- Corporation Tax – This is a tax on the profits of companies.
- Valued Added Tax (VAT) – VAT is a tax on consumer spending. There is some VAT relief for organisations with charitable status but not a general relief from VAT.
- Deposit Interest Retention Tax (DIRT) – This is a tax on the interest you earn from savings.