Charity Trading & Trading Subsidiaries.

Our Charity Specialists can advise on trading limits and tax implications. We can also provide assistance for charities looking to set up a training subsidiary.

The obligations for charities can change.

You can always rely on our advice.

Our Charity team stay up-to-date with obligations and will always keep your best interest at the core of any guidance. We can work with you to make sure you're harnessing the best commercial opportunities to enable your charity to thrive.

Employment Law

It is a fundamental principle that charities are not businesses and should not put their assets at risk by trading. However certain limited trading by a charity will be permitted and the charity will not pay tax on profits it makes from that trading if:

  • It is carrying out primary purpose trading. This is trading in direct furtherance of the charity’s objects in its governing document. An example of this is a school charity that charges for attendance by its pupils or a theatre charity that charges for admission.
  • Its trading is ancillary to its primary purpose. This would include a college selling student textbooks to students or a museum running a cafe for visitors.
  • The charity's level of trade that isn't primary purpose (or ancillary to its primary purpose) falls below the small trading tax exemption limit. This is generally 25% of the charity's annual turnover subject to a cap of £50,000 although a charity with gross annual income of under £20,000 may generate £5,000 from trading so this could be higher than 25%.


For charities that wish to exceed these limits, a trading subsidiary company will be needed. Failure to do this will mean that the charity will pay tax on those profits but also, the charity’s trustees will be running the risk of accounting to the charity from their own pockets for any losses as a result of that trading, as trading of this sort may be in breach of their duty to safeguard the assets of the charity.

The trading subsidiary will usually be a standard limited company registered at Companies House and will have a share capital. The sole shareholder will be the charity which is setting the trading company up. If the trading subsidiary gives its profits to the parent charity, corporation tax should not be due on those payments. The company will not need to deduct tax from the donations before it pays them to the parent charity. Similarly, the charity shouldn’t pay tax on the amounts it receives as long as it uses the money for its charitable purposes. However the payment by the subsidiary must be made within nine months of the end of the accounting period in which the profits were made.

Usually, the charity will invest in the trading company but the charity's trustees should consider if the investment is in the best interests of the charity. This will usually mean that any loans must be on commercial terms and interest at a commercial rate should be paid. The charity trustees should also ensure, so far as possible, that the charity gets a fair return on its investment and that return is spent on the charity's primary purpose.

Please note the tax regime around charities may change form time to time and this not is not intended to be a substitute for taking independent tax advice.

Stuart Rea

Working With Our Sector Team

Our team of specialist charity lawyers have extensive experience of delivering practical, commercial advice and legal solutions to charities and not for profit organisations to enable them to operate successfully, and effectively meet their beneficiaries’ needs.

- Stuart Rea

If you operate in the Charities and Not-For-Profit sector and need legal advice or would simply like to find out more about how we can help you, please get in touch.

Get in Touch

Make an Enquiry

If you have a legal enquiry and would like to speak to one of our specialist team, please get in touch. We look forward to hearing from you.

Start Now

Meet Your Lawyers

Adam Davies


View Profile

Andrew Wynne

Senior Partner

View Profile

Nicole Beddall


View Profile

Pauline Hollington

Lichfield Diocesan Registry Assistant

View Profile

Samantha Roberts


View Profile

Stuart Ness

Senior Associate

View Profile

Stuart Rea


View Profile

Victoria Farmer

Trainee Solicitor

View Profile

What Our Clients Say

Stuart Rea handled our unusual and complex matter with professionalism.  He understood what we wanted to achieve and gave us very clear guidance on our legal position - even though we did not necessarily want to hear the advice it was essential to our charity understanding our legal position and therefore making lawful decisions.  He also worked to the very tight timescales that we needed.

Stuart Rea

Mr S


Excellent service which enabled the Charity to achieve its timetable for the complicated transfer of assets at an affordable price for a small community run charity.

Stuart Rea

Mr W


The change to the Rules of our Charity were dealt with efficiently and in a timescale that was wholly dictated by the speed that dealing with the Charity Commission dictated, which was extensive.

Stuart Rea

Mr T