What does section 256C of the Taxation of Chargeable Gains Act 1992 do?

Section 256C sets out how chargeable gains of a charitable company are attributed to its non-exempt amount for an accounting period. It requires the entire non-exempt amount to be fully allocated between attributable gains under this section and attributable income under the Corporation Tax Act 2010, ensuring no portion remains unallocated.

How can a charitable company use up its non-exempt amount under section 256C?

A charitable company can use up its non-exempt amount entirely by attributing chargeable gains, entirely by attributing income under the Corporation Tax Act 2010, or by a combination of both. The company has flexibility in choosing the allocation, but the full non-exempt amount must be completely consumed with no portion left unallocated.

What happens to gains and income attributed to the non-exempt amount?

Gains and income attributed to the non-exempt amount lose their charitable exemption and become chargeable to tax in the normal way. Any gains or income not attributed to the non-exempt amount remain eligible for the charity exemption, provided they are applied for charitable purposes by the charitable company.

What do the terms attributable income and attributable gains mean in section 256C?

The terms 'attributable income' and 'attributable gains' carry the same meaning as defined in Part 11 of the Corporation Tax Act 2010. These definitions ensure consistency between the capital gains attribution rules in section 256C and the corresponding income attribution provisions within the Corporation Tax Act 2010 framework.

Taxation of Chargeable Gains Act 1992 section 256C

Attributing gains to the non-exempt amount: charitable companies

Section 256C sets out how chargeable gains of a charitable company are attributed to its non-exempt amount for an accounting period, and how that non-exempt amount must be fully allocated between gains and income.

Where a charitable company has a non-exempt amount for an accounting period, its attributable gains can be set against that non-exempt amount, but only to the extent the non-exempt amount has not already been used up
The non-exempt amount can be used up either by attributing chargeable gains to it under this section, or by attributing income to it under the Corporation Tax Act 2010
The entire non-exempt amount must be fully used up — through gains alone, income alone, or a combination of both
The terms "attributable income" and "attributable gains" carry the same meaning as defined in Part 11 of the Corporation Tax Act 2010

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