Defining charity trading

There’s no single legal definition of ‘trading’, but if you regularly buy and sell goods or services to make money, you’re probably trading.

HMRC considers 'badges of trade' to determine whether a trading activity is taking place. These are established in case law and include:

• repetition - an ongoing activity would suggest a trade
• profit motive- some aim to make money would be expected for a trade, even if you do not actually make a profit
• selling mechanism -setting up a shop or online access to services suggests intention to trade
• items bought for resale  - not for consumption/use
• similarity - to other trades.

HMRC don’t need you to fulfil all of these criteria to decide that you are trading; it could just take one of them.

These are:

• primary purpose trading that directly advances your charitable objects
• non primary purpose trading just to raise funds.

Beneficiary trading

A sub-category of primary purpose trading.

Trading that directly advances the charitable objects by beneficiaries being involved in the delivery of the trades, such as:

• a café staffed by people with a learning disability run by adult social care charity
• a disability charity selling goods made by people with disabilities.

Ancillary trading

Treated as part of the primary purpose trade.

Incidental trading activities with a close connection with the delivery of the charity's work such as:

• sale of food and drink in a theatre café.
• the public would expect that to be part of the overall experience and encourages them to participate in the charitable activity, not just to raise funds for it.

Mixed trade

If a trade is partly primary purpose (including beneficiary and/or ancillary) and partly non-primary purpose.