Charity trading - definition and Charity Commission and HMRC interpretation
Charity trading - definition and Charity Commission and HMRC interpretation

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

  • Charity trading - definition and Charity Commission and HMRC interpretation
  • Defining a trade
  • The Charity Commission and trading

Many charities would not describe any of their activities as trading as they do not appear to conform to the traditional commercial trading model. However, many of their activities may well be trading and to not examine those activities at regular intervals could result in an unexpected tax bill.

It is not only HMRC that will be interested. The Charity Commission will look at those activities in the light of a charity's principal aims of raising funds for distribution for charitable purposes and consider closely whether there may have been a breach of trust or an ultra vires situation.

The Charity Commission's attitude is that:

While charities may trade more or less freely in pursuit of their charitable objectives, there are restrictions on engaging in trades the objective of which is to generate funds for the charity. In particular, charities may not engage in such commercially-oriented trades where a significant risk to their assets would be involved. Where trading (other than trading in pursuit of its charitable objects) involves significant risk to a charity's assets, it must be undertaken by a trading subsidiary.

In the light of potential interest from the Charity Commission it would be prudent for a charity with concerns over their 'trading' situation to take the advice of the Commission before embarking on anything specific.

Defining a trade

There is no