Corporation Tax Act 2010 section 495

How income is attributed to the non-exempt amount

Section 495 explains how a charitable company chooses which items of its otherwise exempt income or gains become taxable when the non-charitable expenditure restrictions apply.

• Where the restrictions in section 494 apply, the charitable company may choose which items of attributable income (such as trading income or investment income) lose their tax exemption and are matched against the non-exempt amount.
• The charity makes this choice by giving written notice to an officer of HMRC specifying which income is to be attributed to the non-exempt amount.
• If HMRC requests the charity to make this specification and the charity fails to respond within 30 days of that request, an HMRC officer may make the determination instead.
• The effect is that an amount of income or gains equal to the non-exempt amount (calculated under section 493) is identified as taxable, enabling the charity to complete its tax return and self-assess its liability.