5 November 2018
What has changed?
The Chancellor announced in the budget last week that the charity small trading exemption limits will be increased from April 2019.
The small trading exemption limit allows charities with gross trading income under the threshold to treat their non-primary purpose trading profit as exempt for income and corporation tax purposes.
Currently the maximum gross non-primary purpose trading income a charity can receive without paying tax is £50,000. The new limits have extended this threshold to £80,000.
Further details of this change are detailed here.
This is a much welcomed increase to a threshold that has remained unchanged for many years. Many charities use limited companies wholly owned by the charity, to carry out their trading activities, which allows them to trade over the threshold and gift the profits to the charity. This strategy can help to mitigate tax liabilities on charity trading, whilst also ring fencing any additional risk the charity may face by carrying out a trade.
Whilst a company structure can be an appropriate option for a charity, it comes with additional compliance requirements which can be costly. The increase in threshold will allow some charities to simplify their trading arrangements and enable them to provide more of their funds and resources directly to the good causes that they support.
Can we help?
If you would like to discuss this or any other matter affecting your charity, please do not hesitate to contact your usual UHY advisor.
Alternatively, if you would like to read more charity focused blogs please click here.
