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Charity and trading subsidiary

Why have a separate trading subsidiary company

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Many charities have trading subsidiaries.

What are the reasons for this structure?

Replies (5)

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By tom123
10th Jul 2020 12:28

It will be to do with VAT - plus taking on liabilities like leases etc.

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By grahambonds
10th Jul 2020 12:44

To avoid tax on significant non primary purpose trading, protect charity assets, allow greater flexibility in what can be done.

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By paul.benny
10th Jul 2020 13:05

The main reason is that trading is not a charitable activity - even if the purpose of trading is to generate funds for charitable purposes.

The profits of charity-owned businesses are taxable; they typically donate all of their profits to the parent charity thereby eliminating the tax charge.

And what the previous posters have said.

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RLI
By lionofludesch
10th Jul 2020 13:18

Only worth it if you've a significant amount of trading income, obviously.

It can be a bit of a faff. Your average trustee doesn't appreciate the importance of keeping things separate.

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Replying to lionofludesch:
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By Paul Crowley
10th Jul 2020 14:30

Agreed
Volunteer trustees cause these things to get confused

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