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HMRC internal manual

VAT Charities

Fund-raising: Fund-raising events and a charity’s trading subsidiary

When can a charity’s trading subsidiary hold exempt fund-raising events?

In order to be eligible to hold VAT exempt fund-raising events, a charity’s trading subsidiary must:

  • be wholly owned by the charity
  • transfer all profits, from whatever source, to the charity.

By retaining profits, the trading subsidiary could find itself ineligible to hold exempt fund-raising events.

However, we will accept that for the purposes of this exemption, the transfer of profits condition is met when:

  • the arrangements are compatible with charity law
  • profits are paid to the charity
  • the only profit retained annually by the subsidiary is not subject to corporation tax
  • the profit is retained for development which has the clear aim of increasing funds going to the charity
  • the subsidiary is not involved in any abuse or avoidance.

This approach may be reviewed if the amount of profits eligible for corporation tax relief changes or abuse occurs.