The following Trusts and Inheritance Tax guidance note Produced by Tolley in association with Speechly Bircham LLP provides comprehensive and up to date tax information covering:
A 'trading subsidiary' is a company owned and controlled by a charity, or occasionally several charities, which has been incorporated in order to carry on a trade or business which:
the charity cannot itself carry on due to constitutional restrictions or concerns about business risk and potential liabilities, and / or
the charity cannot carry on in a tax-efficient manner
A trading subsidiary is usually set up to generate income for the charity or charities, as the subsidiary does not have the restrictions to its trading activities that charities have.
A trading subsidiary can be used to:
carry out non-primary purposes trading beyond the limits of the small scale exemption (see the Tax treatment of the charity guidance note)
protect a charity’s assets from the risks of trading
If the subsidiary company gives all or part of its profits to the charity (in place of a dividend) then it will not pay tax on those profits, see the Gifting cash and assets to charity guidance note.
Trading subsidiaries are not cheap to run and generate additional bureaucracy and complexity and so should not be created without proper consideration of their merits and disadvantages.
If a charity wants to set up a trading subsidiary it will need to:
create a company
provide it with trading capital (see below)
consider how the charity's assets can be made available to the company (see below)
ensure that the company gives profits, which would otherwise be taxed, to the charity (see below)
Financing or investing in the subsidiary raises tax and charity law issues. To avoid criticism, charities should consider taking advice on this.
There are several possible ways to finance the subsidiary.
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
IntroductionUK tax must be withheld on UK payments including:•interest•royalties•rental incomeWithholding tax may be reduced under double tax treaties (DTT) or European directives, both of which may be subject to making a formal claim.This guidance note outlines the rules for UK withholding tax, and
Maintenance payments are payments made by a taxpayer to their former or separated spouse for the maintenance of that former spouse or their children. To obtain any tax relief for maintenance payments, one of the couple must have been born before 5 April 1935 and the payments must be made by virtue
This guidance note provides an overview of the steps businesses need to take if aspects of their business change, and as a result, they need to notify HMRC about the change.Changes to name and / or addressIf a business changes its name and / or its address then it is required to notify HMRC of the
Class 1 and Class 1AClass 1 and Class 1A are the categories of NIC that can be charged on expenses reimbursed and benefits provided to employees. These classes are mutually exclusive. A benefit cannot be subject to both Class 1 and Class 1A NIC. Three requirements must be met before Class 1A NIC is
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.