1. Thursday 23 October 2014 THE FUNDING LANDSCAPE 2014 Everything you wanted to know about trading subsidiaries (but were afraid to ask) Samantha Pritchard Email: samantha.pritchard@bonddickinson.comsamantha.pritchard@bonddickinson.com Tel : 0191 230 8391 Mark Honeywell Email: mark.honeywell@bonddickinson.commark.honeywell@bonddickinson.com Tel : 0113 290 4461

2. BOND DICKINSON CHARITIES TEAM Ranked as the leading charity law team in the North by Legal 500 2014 Dedicated practitioners specialising in the charity sector Supported in all the other legal areas by the wider Charities grouop

3. OVERVIEW What will we cover?  The rules on trading for charities  Managing the relationship between a charity and its trading subsidiary

4. TRADING AND TAX What is trading? General rules about trading and tax Exemptions  Primary purpose trading  Ancillary trading  Beneficiaries  Small trading

5. SMALL TRADING Annual turnover limit Total Gross Income of a Charity Maximum permitted sales turnover £20,000£5,000 £20,000 - £200,000 25% of Charity’s total gross income Over £200,000£50,000 (the maximum limit)

6. EXEMPTIONS Extra statutory concession for “one-off” fundraising events  Regularity  Public awareness  Not in competition  Application of profits

7. CONSEQUENCES OF TRADING Risk of loss of charitable status Tax liability Possible breach of trust and personal liability for trustees

8. TRADING SUBSIDIARY Wholly owned subsidiary of Charity Tax efficient fundraising vehicle Profits paid to Charity Charity receives funds as a donation = tax free Need for arm’s length relationship

9. THE GENERAL RULE A Charity’s resources may not be used other than to further its own charitable purposes

10. THE GENERAL RULE IN PRACTICE Staffing Governance, independence and conflicts of interest Premises Other shared resources Use of name and logo

11. FINANCE OF THE TRADING COMPANY – WORKING CAPITAL Does the Charity have the power to invest? Is the investment in the best interests of the Charity? Loan agreement or share capital? Security/guarantees

12. DIFFICULT TO SPOT TRADING SITUATIONS Sponsorship arrangements Commercial participator agreements Joint ventures with commercial organisations

13. SIGNPOSTS CC35 Trustees trading and tax : how charities may lawfully trade CC14 Charities and investment matters : a guide for trustees CC29 Conflicts of Interest : a guide for charity trustees

14. QUESTIONS & ANSWERS

15. CONTACT DETAILS Samantha Pritchard Email: samantha.pritchard@bonddickinson.comsamantha.pritchard@bonddickinson.com Tel : 0191 230 8391 Mark Honeywell Email: mark.honeywell@bonddickinson.commark.honeywell@bonddickinson.com Tel : 0113 290 4461