.png)
.png)
A problem for organisations that trade through charitable subsidiaries
KEY POINTS
- Charities pay no tax on donations received and used for charitable purposes from their trading subsidiaries.
- A payment from the subsidiary company is a distribution which cannot exceed the company’s profit.
- It may be difficult for HMRC to recover tax relief on past incorrect gift aid claims.
- Charities should confirm their position and if necessary contact HMRC.
There is no relief generally available for a charity’s trading profits. Standard practice when a charity wishes to trade for example by running high street shops endorsed by HMRC (see charities guidance notes annex IV) has been for the charity to incorporate a subsidiary company which would carry on the trade and then donate the profits to the charity.
The subsidiary is liable to corporation tax on its trading...
Alternatively, you can register free of charge to read a limited amount of subscriber content per month.
Once you have registered, you will receive an email directing you back to read this item in full.
Please reach out to customer services at +44 (0) 330 161 1234 or 'customer.services@lexisnexis.co.uk' for further assistance.
