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The tax implications and possible pitfalls when a charity becomes involved in trading activities.
KEY POINTS
- The normal ‘badges of a trade’ apply to charities as for any other business.
- The fact that trading profits are used for charitable purposes does exempt them from tax.
- The distinction between primary purpose and ancillary trading.
- Subject to conditions profits from trading are exempt if they derive from a ‘VAT-exempt event’
- Corporate gift aid may be a solution but complications can arise.
The circumstances in which charities can trade the tax consequences of doing so and even whether a charity’s actions amount to trading at all – these are all matters on which the trustees of charities may have questions. This article aims to deal with some of the questions that in the writer’s experience are among those most commonly asked by trustees....
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