Trading subsidiaries of charities

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Trusts and Inheritance Tax

Guidance

Introduction to trading subsidiaries

A 'trading subsidiary' is a company owned and controlled by a charity, or occasionally several charities, which has been incorporated in order to carry on a trade or business which:

•
the charity cannot itself carry on due to constitutional restrictions or concerns about business risk and potential liabilities, and / or
•
the charity cannot carry on in a tax-efficient manner

A trading subsidiary is usually set up to generate income for the charity or charities, as the subsidiary does not have the restrictions to its trading activities that charities have.

A trading subsidiary can be used to:

•
carry out non-primary purposes trading beyond the limits of the small scale exemption (see the Tax treatment of the charity guidance note)
•
protect a charity’s

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