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Trading by charities

Charity law does not normally permit charities to carry on a trade, except in limited circumstances, because carrying on a trade conflicts with the social duties of charities and will inevitably involve a risk. It is a basic tenet of charity law that trustees should not place charitable funds at risk. Trading risks should not be undertaken by a charity simply to raise money.

This can be a complex area, with a taxation and VAT effect, and we are always happy to advise trustees, administrators and other accountants about the pitfalls, and indeed the opportunities.

We set out below some of the main features relating to trading by charities, but if further information is required then please complete our enquiry form.

For the Charity Commission's booklet CC35 - Charities and Trading, visit : CC35 Charities and trading

Charities are allowed to trade in support of the charity's primary purpose. Examples are:

  • the provision of educational services by a school in return for course fees;
  • provision of residential accommodation by a resident care charity in return for payment;
  • fees charged for admission to exhibitions at a museum;
  • fees charged for audiences to attend theatrical performances.

Charities are also allowed to trade where the goods produced by their beneficiaries are sold, for example products made by blind persons who are beneficiaries of a charity for the blind.

Where a charity is carrying out a primary purpose activity that generates income then there may be some ancillary income arising from, say, the sale of food and drink in a restaurant or bar. The raising of funds in this way will not necessarily be regarded as trading, but much depends on the circumstances.

Where a charity is given assets to sell, for example second hand furniture, then the sale of those items is not in the course of trade.

HM Customs and Revenue do not normally seek to tax income arising from the sale of donated goods by a registered charity.

Profits from occasional trading (for example, volunteers organise bazaars, jumble sales, car boot sales, disco's, carnivals, firework displays, etc) are not taxable, so long as the activity is not a regular event and certain other criteria are met.

Donated goods, like other goods, come within the scope of VAT but donated goods are zero rated where sold through charity shops.

Where a charity wishes to raise substantial monies from trading, these activities have to be carried on by a subsidiary trading company which is often wholly owned by the particular charity.

We can advise where trading subsidiaries are suitable for commercial or taxation reasons, and assist with the setting up of such companies.

Sometimes charities may sell donated goods together with non donated goods. Such mixed trading does not necessarily require a subsidiary trading company to be formed and the profits may be considered to be within primary purpose exemption, if the non-primary purpose part is small in absolute terms, and has a turnover which is less than 10% of the whole.

Small trading

An exemption applies to the profits of all trading activities that are not already exempt from tax.
To qualify:

  • the charity's turnover must not exceed £50,000, or
  • if greater, 25% of the charity's “incoming resources”, subject to an overall limit of £50,000
  • the profits must be used for the charity's objects.

Rate Relief

Where business premises are used by a charity for charitable purposes the charity is entitled to 80% mandatory rate and Council Tax relief. The rating authority has a discretion as to waiving the remaining 20%. It is important, therefore, to ensure, if maximum rate relief is to be obtained, that the premises are only used for charitable purposes and that any non-charitable activity is carried on through a separate subsidiary trading company elsewhere.

We are always happy to advise trustees, administrators and accountants on the strategic and tactical planning that is necessary to ensure that unwelcome tax bills do not arise.


As with all our services, our fees are highly competitive. Our offices are set in a rural location, and therefore we have low premises overheads. This means that we are able to offer the highest quality services, very often at the lowest price.

For further information, please email or complete our Enquiry Form


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