What are the tax implications of trading for Charities?

11 Key Steps for Trustees, 1 Giant Leap for your Charity: Month 6

Welcome to step 6 of our governance guide to Trustees! It‘s often thought that a typical charity is an organisation that asks for donations and spends the funds on charitable activities. In fact, donations make up just over 30% of total income for charities (Dec 16, Charity Commission Register), with over 60% coming from trading to raise funds or fees for charitable activities. This article provides information for trustees on how to trade safely.

Step 6: Trading and tax

Charities are associated with giving, but most also actively trade. For businesses, trading means exposure to tax. Charities have no general exemption from tax and pay some taxes at the same rate as businesses. However, there are specific measures that reduce the burden, especially for tax on profits (corporation tax).

Did you know: Charities have twice as much earned income as donations

UK charities have preferential tax status; but some taxes are still paid in full, some are exempt and others are rarely paid. Therefore it is important for trustees to understand the tax position of their charity so that trading is lawful. The correct steps should be taken to ensure that the right structures are in place to achieve efficient tax compliance.

Read month 6: Trading and tax


You can click here read the full publication or any of the previous five steps below:

  1. Finding New Trustees
  2. Internal Financial Controls
  3. Collaborative Working and Mergers
  4. Investments
  5. Trustee meetings and Decision Making