What does section 507 of the Corporation Tax Act 2010 do?

Section 507 specifies exceptions to the substantial donor rules under section 502. It carves out certain transactions — particularly those of an ordinary commercial nature — so they do not trigger adverse tax consequences even where a substantial donation has been made to a charity by the transacting party.

What is the key exception under section 507 CTA 2010?

The key exception applies to transactions that are of an ordinary commercial nature between the parties. If a company engages in normal arm's length business dealings with a charity — such as purchasing services at market rates — those transactions are not caught by the substantial donor rules, even if the company is a substantial donor.

What role does HMRC play in determining exceptions under section 507?

Where there is any question about whether a transaction qualifies for an exception, an officer of Revenue and Customs has authority to review and make determinations. This provides appropriate oversight while allowing genuine commercial activity between charities and substantial donors to proceed without penalty.

Is there an equivalent income tax provision to section 507 CTA 2010?

Yes. Section 554 of the Income Tax Act provides a corresponding income tax rule. The exception for ordinary commercial transactions operates in a similar way for both corporation tax and income tax purposes, ensuring consistent treatment of legitimate business dealings between donors and charities across both tax regimes.

Corporation Tax Act 2010 section 507

Transactions: exceptions

Section 507 specifies certain exceptions to the types of transactions that would otherwise be caught by the substantial donor rules under section 502.

Certain transactions are carved out from the substantial donor provisions, meaning they do not trigger adverse tax consequences even where a substantial donation has been made to a charity.
The key exception applies to transactions that are of an ordinary commercial nature between the parties — in other words, normal arm's length business dealings.
The determination of whether a transaction qualifies for an exception may involve review by an officer of Revenue and Customs.
There is a corresponding income tax rule in section 554 of the Income Tax Act, so the exception operates in a similar way for both corporation tax and income tax purposes.

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