Charity investment by trading and powers and duties of trustees
Charity investment by trading and powers and duties of trustees

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Charity investment by trading and powers and duties of trustees
  • Investment and trading
  • Investment powers
  • Investment duties

Investment and trading

There are a number of ways that charities can receive their income, and investment must be distinguished from trading. Sometimes the distinction is difficult to make such as in the case of land. Where land is purchased by a charity with the intention of letting it out at a rent, this is an investment. However, if they purchase the land with the purpose of selling it on for, say, development at a higher price, they will be involved in trade.

In such a situation it could be argued that while the charity held the land it was in effect an investment and only became a trade asset when it was sold. This will not hold water if the intention was always to sell it on at a higher price. The critical factor will be the charity's original intention. As was said in Trustees of BT Pension Schemes & Others v Clark (HM Inspector of Taxes):

If the legal or commercial characteristics of a transaction point unequivocally to trading, the trader's subjective purpose or motivation cannot change the character of the transaction. But the character of the transaction may be ambiguous until resolved by reference to purpose or motivation

It has been argued that the speculative nature of a transaction is likely to make it trading rather than investment. However,