The tax treatment of charities can be complex. Many charities trade either as part of their charitable interests or to raise funds. As a first step, any charity hoping to benefit from any beneficial tax treatment needs to be recognised as a charity for UK tax purposes by HMRC as well as meeting other criteria.

A charity will not pay tax on profits it makes from trade if:

• they are making money to help their charity’s aims and objectives, known as ‘primary purpose trading’
• their level of trade that is not primary purpose falls below the charity’s small trading tax exemption limit
• they trade through a subsidiary trading company

The charity must pay tax on any other profits.

The small trading tax exemption limits are as follows:

If the charity’s small trading turnover is higher than the exemption limits, then they are required to pay tax on all of their profits from that trade.