Charities
Hello
A charity hospice client has a shop which sells both donated and bought in goods. All of the profit is ploughed back into the hospice
I was just checking if the profit from the bought in goods could possibly be taxable.
The legislations states that non charitable trading activities are allowed in charities up to specified limits, as follows
1) If the turnover from that activity is less than 5k a year (it exceeds that)
2) If the turnover from trade is less than 25% of the gross income of the charity, or less than 50k, whichever is lower
I am slightly unclear re point 2. When it states trade, does it also include donated goods when applied to this test? Point 1, refers to activity but point 2 specifically states trade. If it includes donated goods we have a problem!
Agreed
Selling donated goods is a trade and the sales so made are "trading incoming resources" for the purposes of the small scale trades exemption.
Who staffs the shops? And how are the charities objectives defined? If the staff fall within the defined class of beneficiaries, ie the inhabitants of Littlehampton, as opposed to cancer sufferers in the Littlehampton area, then you may fall within the main exemption.
Ideally the shop would be run through a trading company, who would gift-aid up their profits within 9 months.
I would say it does
If you substitute 'trade' with 'sales' it is clear that it's the value of sales that is important not the costs of purchases (nil for donated)