The small trading exemption lets a charity make tax-free profits from trading that is not part of its primary purpose, as long as the turnover from that trading stays within an annual limit of between £8,000 and £80,000.
The limit
The limit applies to the turnover of the charity’s non-primary purpose trading, not the profit, and depends on the charity’s total income for the year:
| Charity’s total income | Maximum non-primary purpose trading turnover |
|---|---|
| Under £32,000 | £8,000 |
| £32,000 to £320,000 | 25% of the charity’s total income |
| Over £320,000 | £80,000 |
The limits are reduced in proportion for an accounting period shorter than 12 months.
If the limit is exceeded
The small trading exemption is all or nothing. Go over the limit and the whole profit from that trading becomes taxable, not just the excess. The exemption can still apply if, at the start of the period, the charity reasonably expected to stay within the limit.
Other conditions
The profits must be used only for the charity’s purposes. Primary purpose trading does not count towards the limit at all.
Heads up — a charity expecting to exceed the limit regularly should consider a trading subsidiary.
Read more: Corporation Tax for charities and CASCs (CT600E).