Payments for use of a charity’s logo
The issue here is whether or not payments for use of a charity’s logo are trading income of the charity.
Where the logo came into existence prior to 1 April 2002 (in the case of charitable companies, and for charitable trusts whenever the logo came into existence), a one-off payment is charged to tax as miscellaneous income and therefore not tax exempt apart from the small scale trading exemption. For annual payments, exemption is available. Whether or not the payments are annual payments will depend on the precise terms of the agreement for the use of the logo. In broad terms, the payments must be made under a legal obligation, recur each year and be a pure donation in the hands of the charity.
Where the logo came into existence on or after 1 April 2002 (in the case of charitable companies only), the treatment of the income depends on whether the logo is classed as a trading or non-trading asset. If the charity is passively receiving income from the company without publicising the use of the logo then this is likely to be regarded as a non-trading asset and the income exempt from tax.
Full guidance can be found under annex iv of HMRC’s Charities guidance.
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