Why use a subsidiary trading company?
Your charity might want to use a subsidiary trading company to: • carry out non-primary purpose trading on a much bigger scale than your charity would be allowed to • protect your charity’s assets from the risks of trading – in case the turnover from the business venture wasn’t enough to cover the costs of carrying on the trade • set up a separate administrative unit for accounting or management purposes A subsidiary company can take advantage of the tax relief available for charitable donations. If your charity’s subsidiary company gives all or part of its profits to your charity then it won’t have to pay any tax on those profits. Your charity should use a subsidiary trading company for any venture that would place its assets at significant risk if it carried on the trading activity itself. But if the tax benefits are the main reason for considering setting up a trading subsidiary it’s worth weighing up the advantages and disadvantages carefully. It might turn out that the advantages
