Charity trading and business activities
Trading
Trading is a term used in relation to income and corporation tax to describe activities, which involve the provision of goods or services to customers on a commercial basis. When deciding whether a trade exists, it is of no relevance that you do not intend to make a profit or that you intend profits to be used only for charitable purposes.
Trading is not itself a charitable purpose, but charities can and do trade either to fulfil a charitable purpose or to simply raise funds. Any profits your charity generates from trading activities are taxable - but a range of tax exemptions is available depending on the nature of your trading activities.
Business Activities
VAT law uses the concept of ‘business’, which has a broad definition. As a general rule, if your charity is making a charge for an activity it is in business for VAT purposes. Your charitable status has no bearing on whether or not you are in business for VAT purposes. Once registered for VAT your charity will be subject to the normal VAT requirements of any other business. For more information please see guidance about VAT for charities.
If your charity is carrying on a business activity you need to consider whether that activity is taxable or exempt from VAT. If your charity is engaged in taxable business activities you are subject to VAT registration thresholds in the same way as any other business. For more information please see VAT Notice 700/1: Should I register for VAT?
Your charity can choose to voluntarily register for VAT but only if you make taxable supplies. For more information please see VAT Notice 701/1 - Charities
Non business activities are outside the scope of VAT, and by concession the provision of low cost welfare services is also treated as outside the scope of VAT. For more information Please see VAT Notice 701/2 - Welfare.
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