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HMRC internal manual

VAT Trade Unions and Professional Bodies

HM Revenue & Customs
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Trade unions and professional bodies: Criteria that all the bodies must fulfil: Non-profit-making organisations

A non-profit-making organisation is normally one whose constitution or articles of association preclude it from distributing surpluses of income over expenditure to its members, shareholders or any other party, except if it is going into liquidation or otherwise ceasing to trade. If there is no such provision precluding distribution, an organisation may still be accepted as non-profit-making if it can demonstrate that in practice it does not distribute any surpluses and is not in a position to channel money to anybody able to exercise control of the activities. The aims and objectives of the organisation will also be taken into account. Surpluses that are generated by some activities and which are then used to subsidise other activities, for example the application of funds generated by a social event towards a trade union’s pay campaign, will not automatically debar an organisation from being treated as non-profit-making.