Official charity trading guidance and forms updated

Official guidance on trading by charities has been updated by the Charity Commission (England and Wales).

Trustees trading and tax: how charities may lawfully trade‘ (CC35)

“replaces the previous guidance Charities and Trading (CC35), published in July 2001. As well as being written in a clearer style, this guidance provides more practical advice on charities investing in and using trading subsidiaries, and reflects developments in the law and the commission’s experience of advising on the issues.”

Update: Bates Wells Braithwaite Briefing clarifies the changes further:

The main change is the insertion of a new section 4.5:

“Can trustees expect their charity’s wholly-owned trading subsidiary to always Gift Aid all the profits shown in the profit and loss account to its parent charity?” – with the answer “No – If the accounting profit is higher than the value calculated for distributable profits, only the lower figure can be paid across under Gift Aid.”

The guidance also sets out when Commission permission is needed if a charity plans to write off a loan to a trading subsidiary.

This links with the HMRC update. A charity auditor suggests that in practice this will not impact many charities.

HMRC guidance

HM Revenue and Customs has also made updates on charity trading to its ‘Charities: detailed guidance notes‘ (which outline how the tax system operates for charities).

Annex iv: trading and business activities – basic principles has been updated at sections 45 and 47 to detail impacts on direct taxation arrangements between charities and their trading subsidiary companies.

This clarifies that any donation made by a subsidiary company to its parent charity which exceeds the subsidiary’s profits available for distribution is unlawful under the Companies Act 2006.

HMRC change of details form

HM Revenue and Customs has updated its pdf forms to be used, by organisations already registered with them, when communicating significant changes. As well as filling in/printing pdf forms, changes can also be sent in electronically using an HMRC online account.

See HMRC Charities change of details form (ChV1) page.

We didn’t spot a link to the Welsh version of the form – is this accessed differently?