If enacted in its current form, clause 32 of the Finance Bill
2015-16 (the 'Bill') will remove
corporation tax relief for costs incurred by a company in
purchasing goodwill and other closely related assets (such as
unregistered trademarks and mailing lists).
Charities often set up a trading company to raise funds by carrying
on non-charitable trading activities. So that the trading company
can do this, the charity will often grant it rights over its logo
(which may be an unregistered trademark) and its mailing list. In
order to comply with charity and tax law, these rights will be
granted on arm's length commercial terms.
Whilst acknowledging that clause 32 of the Bill will not affect all
charity trading companies, the Institute of Chartered Accountants
in England and Wales ('ICAEW') has made a
representation to the government highlighting that trading
companies owned by trustees of a charitable trust or an
unincorporated association, or by several charities. The ICAEW
considers that all charity trading companies should be entitled to
claim corporation tax relief in these circumstances and asks the
government to amend the draft legislation accordingly.
The Bill is currently before a Committee of the House of Commons
and it waits to be seen whether the representation from the ICAEW
will be taken into account.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
