What does section 506 of the Corporation Tax Act 2010 do?

Section 506 provides that certain payments or benefits connected with gift aid donations should be disregarded when calculating a charity's non-charitable expenditure. This applies where the benefits are modest enough that they would not disqualify the underlying donation from being a qualifying gift aid donation under the associated benefits rules.

Which payments or benefits can be ignored under section 506 CTA 2010?

Payments or benefits arising from transactions connected with gift aid donations — from both individual donors and companies — can be ignored. They must fall within the permitted thresholds under the gift aid associated benefits rules, meaning they are small enough not to disqualify the donation from qualifying as a gift aid donation.

How does section 506 affect a charity's non-charitable expenditure calculation?

If a charity provides a small token of appreciation to a donor, such as a modest gift, and the benefit falls within the gift aid associated benefits thresholds, the charity does not need to include its cost when totalling non-charitable expenditure. This prevents charities from being penalised for providing minor permitted donor benefits.

Can you give an example of how section 506 CTA 2010 works in practice?

If a charity receives a £500 gift aid donation from a company and provides a £20 plaque in acknowledgement, the benefit is low enough relative to the donation to remain within permitted limits. Because it does not disqualify the donation under gift aid rules, the £20 cost is also ignored when calculating non-charitable expenditure.

Corporation Tax Act 2010 section 506

Section 504: certain payments and benefits to be ignored

Section 506 provides that certain payments or benefits connected with gift aid donations should be disregarded when calculating a charity's non-charitable expenditure.

When assessing non-charitable expenditure, some payments or benefits linked to gift aid donations can be ignored.
This applies to gift aid donations made by both individuals and companies.
The payments or benefits are ignored if they are small enough that they would not disqualify the donation from being a qualifying donation under the associated benefits rules.
This prevents charities from being penalised for providing minor donor benefits that are already permitted under gift aid rules.

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