When do you need a trading subsidiary?

If the activities you are planning do not fall within the exemptions and the activities are not fulfilling the primary purpose of the charity, then the activity may be undertaken within a trading subsidiary owned by the charity.

The Charity Commission advise trustees to consider the risks involved in the trading and to channel risk-bearing activities and trading to generate income through a trading subsidiary. In particular, the trustees should not put the charity’s assets at risk through its trading activities. If the taxable profits from a trading subsidiary are transferred to the charity under Gift Aid they are not liable to tax. Similarly it may suit the charity to channel all activity liable to VAT through a trading subsidiary, potentially allowing the charity to remain unregistered for VAT.

Want to discuss further?

Helen Elliott

Partner

Ross Palmer

Senior Tax Manager

Gillian McKay

Senior Tax Manager

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