Definition
Primary purpose trading is trading a charity carries on as part of delivering its charitable purpose, such as a school charging fees or a theatre charity selling tickets. The profits are exempt from Corporation Tax if they are used for the charity's purposes.
What counts
| Kind of trading | Examples |
|---|---|
| Carrying out the charity’s primary purpose | An educational charity charging course fees; a care charity charging for residential care; an arts charity selling tickets to its productions |
| Work done mainly by beneficiaries | A charity for disabled people selling goods its beneficiaries make |
| Ancillary trading | A theatre charity selling drinks to its audience; a college selling textbooks to its students |
What does not
Trading simply to raise money is not primary purpose trading, however good the cause. Examples are selling bought-in goods, Christmas cards, sponsorship that advertises a business, and letting facilities to the general public with services attached. Selling donated goods is not treated as trading at all.
The tax result
- Primary purpose trading profits are covered by the charitable exemption.
- Other trading is taxable unless it falls within the small trading exemption.
- Charities with significant fundraising trade usually run it through a trading subsidiary.
Read more: Corporation Tax for charities and CASCs (CT600E).