Finance: Advice line - Pesh Framjee on finance and governance

Q: My charity runs training courses and charges a fee - we hope to obtain corporate sponsorship for these courses and we will publicise the donor's support. Will the funding be liable to corporation tax?

A: It is vital to establish the exact substance of the transaction and see whether you are receiving a donation. In essence, if you are providing publicity for the sponsor, the payment is often no longer treated as a pure donation.

If your charity offers publicity for the corporate donor (for example, by use of its logo) it is likely to be construed that the money it is paying is in exchange for an advertising service, with implications for both corporation tax and VAT. In some cases it is possible to split the payment from the outset to distinguish between the donation and publicity payment.

The Inland Revenue has explained that if sponsorship payments are no longer treated as a pure donation, they may be treated as:

- The income of a stand-alone trade;

- Part of the income of a wider trade; or

- Some other kind of income.

If the income is treated as income of a stand-alone trade, it will be viewed separately from the charity's other income.

However, where a payment is viewed as part of a wider trade, the income will be treated as part of the income of that wider trade and the tax position will follow.

So if the corporate donation is essentially supporting your primary purpose trade of running training courses, the donation is unlikely to be taxable even if the donor receives a publicity benefit.

Pesh Framjee is head of the non profit unit at Deloitte and special adviser to the CFDG. No liability arises to the author, his firm or Third Sector. Send your questions to

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