Why does our trading subsidiary need to pay VAT, aren’t they exempt if we give the profits to the charity?

So that a subsidiary does not pay tax, it must shed its taxable profits by tax-effective transfer to the charity by Gift Aid. However, this means that the profits are not subject to corporation tax, and has no bearing on VAT. If the subsidiary makes business supplies above the VAT registration threshold, then it will need to be registered for VAT, and pay VAT on those supplies.

Want to discuss further?

Helen Elliott

Partner

Ross Palmer

Senior Tax Manager

Gillian McKay

Senior Tax Manager

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