What does section 492 of the Corporation Tax Act 2010 do?

Section 492 restricts the tax exemptions normally available to charitable companies. Where a charitable company has a non-exempt amount for an accounting period, the exemptions under Part 11 of the Corporation Tax Act 2010 and certain offshore income gains relief are withdrawn in proportion to income attributed to that non-exempt amount.

How is the non-exempt amount determined under section 492?

The non-exempt amount is calculated under section 493 of the Corporation Tax Act 2010, reflecting expenditure not applied for charitable purposes. Section 494 then sets out how the charitable company's income is attributed to that non-exempt amount, determining the extent to which exemptions are withdrawn.

Which tax exemptions are affected by the restriction in section 492?

The restriction covers all exemptions under Part 11 of the Corporation Tax Act 2010, including those for trading profits, property income, and savings and investment income. It also extends to offshore income gains under the Offshore Funds (Tax) Regulations 2009 and chargeable gains under section 256(4) of the Taxation of Chargeable Gains Act 1992.

What happens to withdrawn exemptions under section 492?

Withdrawn exemptions are treated as if they had never applied to the relevant portion of the charitable company's income. This means the charity is taxed on that income as though no exemption had ever existed, making the attributed income fully chargeable to corporation tax for the accounting period.

Corporation Tax Act 2010 section 492

Restrictions on exemptions

Section 492 restricts the tax exemptions normally available to charitable companies where some of their income is attributed to non-charitable expenditure.

Where a charitable company has a "non-exempt amount" for an accounting period, certain tax exemptions are withdrawn in proportion to the income attributed to that non-exempt amount
The affected exemptions include all exemptions under Part 11 of the Corporation Tax Act 2010 and the exemption from corporation tax on certain offshore income gains under regulation 31(1) of the Offshore Funds (Tax) Regulations 2009
The withdrawn exemptions are treated as if they had never applied to the relevant portion of income, meaning the charity is taxed on that income as though no exemption had ever existed
A corresponding restriction applies to chargeable gains under section 256(4) of the Taxation of Chargeable Gains Act 1992, ensuring gains attributed to non-charitable expenditure are also brought into charge

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