Corporation Tax Act 2010 section 501

Section 496(1)(g) and (h): investments and loans

Section 501 clarifies that only net new investment and lending activity by a charitable company counts as non-charitable expenditure, by allowing reinvestment or re-lending of proceeds received in the same accounting period.

• Where a charitable company realises an investment or receives repayment of a loan during an accounting period, it may reinvest or re-lend those proceeds without the reinvestment being treated as non-charitable expenditure.
• This relief applies only where the original investment was not an approved charitable investment, or the original loan was not an approved charitable loan, meaning the original outlay would itself have been non-charitable expenditure.
• The amount reinvested or re-lent that escapes being classed as non-charitable expenditure is capped at the amount originally invested or lent — any excess would be fresh non-charitable expenditure.
• The practical effect is that only the net increase in non-approved investments and loans during an accounting period is included in the calculation of non-charitable expenditure, rather than the gross amount deployed.