What kinds of trading can my charity carry out without being subject to income or corporation tax?

Primary purpose trading is trade carried out by a charity in the course of carrying out its main objects and is exempt from income and corporation tax. Examples may include the provision of educational services by a school or college in return for course fees, the holding of an exhibition by an art gallery or museum in return for admission fees, of the provision of residential care by a care home in return for payment.

The profits of a trade are exempt where the work in connection with the trade is mainly (at least 50%) carried out by beneficiaries of a charity, such as a farm operated by students of an agricultural college, or the sale of goods manufactured by disabled people who are beneficiaries of a disabled charity. Ancillary trading is also exempt, that is trade undertaken in the course of carrying out a primary purpose, for example the sale of relevant goods or provision of services for the benefit of students by a school or college, the sale of food and drink in a cafeteria to visitors to exhibits by an art gallery or museum, or in a restaurant or bar to members of the audience by a theatre.

If there are components of a trade that both do and do not come under these exemptions then it is a mixed trade, which is split into taxable and non-taxable amounts. Finally, there is a small scale trade exemption wherein non-exempt trading is not taxable as long as it is less than £80,000 in a financial year (for charities with annual income over £320,000).

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Ross Palmer

Senior Tax Manager

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