A guide to third sector trading - WCVA
A guide to third sector trading - WCVA
A guide to third sector trading - WCVA
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It’s an idea, but is it business? A <strong>guide</strong> <strong>to</strong> <strong>third</strong> sec<strong>to</strong>r <strong>trading</strong><br />
1: Getting<br />
started<br />
2: First steps 3: Business<br />
planning<br />
4: Legal and<br />
governance<br />
5: Funding<br />
and<br />
resourcing<br />
6: Financial<br />
controls<br />
7: Managing<br />
growth<br />
8: Management<br />
and<br />
governance<br />
9: Social<br />
enterprise<br />
10: Sources<br />
of support<br />
Is there a choice? Note that if your objects are exclusively<br />
charitable then, in law, you are au<strong>to</strong>matically considered a charity,<br />
and if your income exceeds £5000 per annum you are generally<br />
required <strong>to</strong> register with the Charity Commission (subject <strong>to</strong><br />
certain limited exemptions). In practice this requirement is widely<br />
flouted, leaving the ‘choice’ of charity registration rather less clear.<br />
Why does it matter whether your <strong>trading</strong> organisation is<br />
a charity?<br />
• Some types of <strong>trading</strong> are unacceptable for charities under<br />
charity law (see below).<br />
• Profits (surpluses) made by charities attract some valuable<br />
corporation tax concessions which are not enjoyed by other<br />
businesses.<br />
• Charities receive rate relief on commercial properties.<br />
• There are VAT concessions for charities under certain limited<br />
conditions (but don’t expect the regulations will be easy <strong>to</strong><br />
follow if you are a newcomer).<br />
Types of <strong>trading</strong><br />
What types of <strong>trading</strong> are acceptable for charities? There is more<br />
scope for charities <strong>to</strong> trade than some people think. But<br />
you need <strong>to</strong> be clear what type of <strong>trading</strong> it is – ie how it will<br />
be regarded by the Charity Commission and HM Revenue<br />
and Cus<strong>to</strong>ms. The following distinct categories are explained<br />
further below:<br />
• non-<strong>trading</strong> – ie activities which are not technically regarded as<br />
<strong>trading</strong> by the Commission<br />
• ‘primary purpose <strong>trading</strong>’ – ie activities which directly meet<br />
some or all of your charitable objectives<br />
• ‘ancillary <strong>trading</strong>’<br />
• small-scale <strong>trading</strong> which, although it is not primary purpose or<br />
ancillary <strong>trading</strong>, poses a low risk <strong>to</strong> the charity<br />
• other <strong>trading</strong>: some other activities including lotteries.<br />
When <strong>trading</strong> may not be acceptable for charities?<br />
A few rules of thumb:<br />
• the constitution or memorandum and articles of association of<br />
some charities specifically rule out the possibility of <strong>trading</strong> –<br />
you must check for this first<br />
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