Income Tax Act 2007 section 539

Restrictions on exemptions

Section 539 restricts the tax exemptions normally available to charitable trusts where some of their income is linked to non-charitable expenditure (the "non-exempt amount").

• Where a charitable trust has a non-exempt amount for a tax year, its income tax exemptions are restricted to the extent that income is attributed to that non-exempt amount.
• Income attributed to the non-exempt amount is treated as if the exemptions had never applied, meaning it becomes fully taxable.
• The restrictions also cover extended exemptions for adjustment income, post-cessation receipts, fund-raising event profits, and income from estates in administration.
• Equivalent restrictions apply to chargeable gains under section 256(4) of the Taxation of Chargeable Gains Act 1992.