Taxation of Chargeable Gains Act 1992 section 256

Charities

Section 256 provides an exemption from capital gains tax for charities, subject to important conditions and anti-avoidance rules that apply when property leaves charitable ownership or when a charity has non-charitable expenditure.

• Gains accruing to a charity are exempt from capital gains tax provided they are both applicable and applied for charitable purposes.
• If property held on charitable trusts ceases to be subject to those trusts, the trustees are deemed to have disposed of and reacquired the property at market value, and the resulting gain is not exempt — with HMRC able to assess up to 3 years after the year in which the property leaves charitable trusts.
• Where a charitable trust or charitable company has a non-exempt amount (broadly, expenditure that is not for charitable purposes), gains attributed to that non-exempt amount lose their exemption and are treated as chargeable gains.
• Further restrictions on the charitable exemption are set out in the income tax and corporation tax legislation governing charitable trusts and charitable companies respectively.