Increase in the Charities’ small trading exemption limits

From 1 April 2019, the small trading exemption limits goes up for smaller charities with annual income under £32,000. The maximum non-primary purpose trading income increases from £5,000 to £8,000.

For the larger charities with income over £320,000, the maximum non-primary purpose trading income increases from £50,000 to £80,000.

For annual charity income between £32,000 to £320,000, the maximum non-primary purpose trading income remains at 25% of total income.

However, charities need to be cautious and not to be seen as a non charitable trading business. Charity Commission will take this into consideration to determine whether the organisation was established or continues for exclusively for charitable purposes.

Trading activities of a charity generally do not relate to the primary purpose of the charity. Charities sell Christmas cards which is a huge market for many charities. Other trading activities could be sale of bought in goods, commission received and the provisions of facilities. All the money raised is generally part of the organisation’s fundraising.

If the non-primary purpose trading income exceeds £80,000, the charity may need to consider setting up a trading subsidiary to protect the charity’s net income from being taxed by HMRC.

If you are trustee of a charity and you wish to discuss this further, please contact Annie Lee by email: annie.lee@wsm.co.uk