Why UK Tax Exemption is so Important for Scientology

Since being rejected by the Charity Commission in 1999, Scientology has been required to pay taxes on its activities in the UK. This includes business rates on its properties, VAT (sales tax) and corporation tax, which is currently set at 25% of annual profits.

As things stand, Scientology operates through an organisation named COSRECI, which is registered in Australia but does business solely in the United Kingdom. This means they can avoid paying income tax as under the Australian Income Tax Assessment Act 1997, “operations conducted by a foreign branch” of an Australian company are exempt.

Scientology's UK headquarters, Saint Hill — Scientology’s UK headquarters, Saint Hill near East Grinstead

In January 2023, a specialist valuation tribunal in England ruled that Scientology properties are ‘places of public worship’, which entitles them to exemption from ‘non-domestic rating’, a business tax on property set by local authorities. Their most recent accounts indicate that in light of this judgement, COSRECI has sought a refund of its previously paid tax – the value of which will not become clear until it next files accounts in June 2024.

In order to gain full tax exemption and ‘charity’ status in the UK, it will need to overturn the Charity Commission’s 1999 decision, which ruled Scientology was “not established for the charitable purpose of promoting the moral or spiritual welfare and improvement of the community.”

Scientology Sunday Service

Integral to its recent court victories is the Scientology ‘Sunday Service’, which it claims is “a bringing together of many beings in a joint spiritual experience and an occasion to recognise the ultimate which is the Eighth Dynamic or God”… whatever that means.

It consists of reading the Creed of the Church of Scientology, recital of L. Ron Hubbard literature, group auditing and chanting of the ‘Prayer to Total Freedom‘. Crucially, the service is open to all – theoretically including those who are not in ‘good standing’ with the Church. The service is therefore a act of public worship.

Youtuber Reckless Ben recorded a Scientology Sunday Service on his channel

Scientology will need to convince the Charity Commission its Sunday Service plays an important part in the life of a Scientologist and is free for anyone to attend – which constitutes a public benefit under the banner of ‘promoting moral and spiritual welfare’.

In his blog, Mike Rinder states “Anyone who really knows Scientology doesn’t mistake the fact that they offer “Sunday Services” for anything other than an attempt to appear to be something they are not. You must pay before you go for scientology services. The “free Sunday Service” would not exist if they were not trying to gain tax exemption or recognition as a valid religion.“

When I was on staff at the Church of Scientology London, Director of Special Affairs Mark Pinchin encouraged us to attend Sunday Service, announcing at a staff muster it was ‘really important for our religious recognition’. It turns out that was because inspectors were due to make both announced and unannounced visits to determine whether the building was in fact, open for public worship.

Charitable benefits

When Scientology applied for charity status in 1999, it did so under a separate entity, Church of Scientology (England and Wales). This company has remained registered as ‘active’ with Companies House, but its most recent filings show total assets of just £20 ($25 USD). It is likely that should they attempt to apply for tax exemption again, it would do so under this entity, rendering COSRECI useless.

Charitable status in the United Kingdom hails several benefits, such as

Exemption from Income Tax
Exemption from Corporation Tax
Exemption from Inheritance Tax applied to gifts left to the Church
Exemption from Stamp Duty on property and land transfers or conveyances
Capital Gains tax exemption on assets
80% reduction in normal business rates

The Church would also become eligible to claim Gift Aid. Essentially, this is a government scheme where charities are able to claim an additional 25% of the donations received by UK taxpayers from HMRC, at no cost to the benefactor – if you donate £100, the charity would receive £125.

In its 2022 accounts, COSRECI declared £10.2 million ($12.9 million USD) in donations from its parishioners. If these were made by UK taxpayers and the Church were able to claim Gift Aid, it would’ve generated Scientology a further £2.5 million ($3.2 million USD) in donations from the government.

It’s not a case of if, but when

A Freedom of Information Act request I filed with the Charity Commission in March revealed that Scientology has not yet sought to appeal the 1999 rejection. However it is not a case of if, but when.

The decision to award charity status is based “mainly on the information the applicant supplies”, but in some cases additional information may be considered by the Commission – such as “information sent to it by third parties or other regulators”.

When Scientology do submit a new application with the Charity Commission, it will become vital that the regulator is presented with the appropriate resources to make an informed decision on whether Scientology truly does benefit the public. A key question that will be asked is whether Scientology Sunday Service is indeed open to all – including declared ‘Suppressive Persons’, and ultimately whether it constitutes a religious service.

Yesterday, I submitted a second FOIA request seeking further information on the Charity Commission’s process of obtaining information from third parties in relation to Scientology, and whether it would consider information supplied by former members, critics and academics.

It is likely to be at least 30 days until I receive a response, but it will be posted here on Scientology Business as soon as it is received.

The investigation continues…