14.1 Where a trust or body delivers a public benefit and is devoted exclusively to one or more of the charitable objects defined in statute, it may seek registration as a charity. Charities are subject to close regulation to ensure that they do devote their funds to the charitable objects, but in return they are exempt from Income or Corporation Tax on any income or profit. Because they will tend to buy goods and services (incurring VAT when they do so) and then give those goods and services to the beneficiaries of the charity (therefore not recovering VAT on sales) they tend to incur a shortfall of VAT every year, and they may recover that shortfall from the Government. Further, a charity is automatically exempt 80% of business rates on premises which it occupies, and this can be increased to 100% by the local authority.
14.2 As a result, charities can be very effective means of local authorities delivering services, either alone or in partnership with other organisations.