FINANCE NEWS: Abolition of lower rate of corporation tax helps charities

A Budget cut in corporation tax for small businesses will benefit charities with trading subsidiaries.

The chancellor Gordon Brown abolished the lower rate of corporation tax, which means that the first £10,000 of company profits will not be taxed.

According to Stephen Burgess, charities consultant at accountants Saffery Champness, the move will release much-needed working capital for organisations' trading subsidiaries.

"Before, in order to avoid paying tax, trading subsidiaries had to make a Gift Aid donation of their profits to their parent charity. Now they can return £10,000 a year to the business,

he said.

"That extra cash will be helpful to fund working capital, something that has been a problem in the past."

Burgess added that charities' trading subsidiaries had traditionally been cash poor and parent charities had been forced to use a mixture of loan and equities finance to fund them.

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