THE FUNDING LANDSCAPE 2014
Everything you wanted to know about trading
subsidiaries (but were afraid to ask)
Samantha Pritchard
Email: [email protected]
Tel : 0191 230 8391
Mark Honeywell
Email: [email protected]
Tel : 0113 290 4461
Thursday 23 October 2014
BOND DICKINSON CHARITIES TEAM
•
Ranked as the leading charity law team in the North by Legal 500 2014
•
Dedicated practitioners specialising in the charity sector
•
Supported in all the other legal areas by the wider Charities grouop
OVERVIEW
• What will we cover?

The rules on trading for charities

Managing the relationship between a charity and its trading
subsidiary
TRADING AND TAX
• What is trading?
• General rules about trading and tax
• Exemptions




Primary purpose trading
Ancillary trading
Beneficiaries
Small trading
SMALL TRADING
• Annual turnover limit
Total
Income
Charity
£20,000
Gross Maximum
permitted
of a sales turnover
£20,000
£200,000
Over £200,000
£5,000
- 25% of Charity’s total
gross income
£50,000 (the maximum
limit)
EXEMPTIONS
• Extra statutory concession for “one-off” fundraising
events

Regularity

Public awareness

Not in competition

Application of profits
CONSEQUENCES OF TRADING
• Risk of loss of charitable status
• Tax liability
• Possible breach of trust and personal liability for trustees
TRADING SUBSIDIARY
• Wholly owned subsidiary of Charity
• Tax efficient fundraising vehicle
• Profits paid to Charity
• Charity receives funds as a donation = tax free
• Need for arm’s length relationship
THE GENERAL RULE
• A Charity’s resources may not be used other than to further
its own charitable purposes
THE GENERAL RULE IN PRACTICE
• Staffing
• Governance, independence and conflicts of interest
• Premises
• Other shared resources
• Use of name and logo
FINANCE OF THE TRADING COMPANY –
WORKING CAPITAL
• Does the Charity have the power to invest?
• Is the investment in the best interests of the Charity?
• Loan agreement or share capital?
• Security/guarantees
DIFFICULT TO SPOT TRADING SITUATIONS
• Sponsorship arrangements
• Commercial participator agreements
• Joint ventures with commercial organisations
SIGNPOSTS
• CC35 Trustees trading and tax : how charities may lawfully
trade
• CC14 Charities and investment matters : a guide for trustees
• CC29 Conflicts of Interest : a guide for charity trustees
QUESTIONS & ANSWERS
CONTACT DETAILS
Samantha Pritchard
Email: [email protected]
Tel : 0191 230 8391
Mark Honeywell
Email: [email protected]
Tel : 0113 290 4461