OSCR issues guidance on charities and trading

By Christine Scott, ICAS Head of Charities & Pensions and Keith Purnell, Policy Adviser, Charities

9 April 2018

Christine Scott and Keith Purnell report on OSCR’s new guidance on charities and trading for Scottish charities.

For many charities, trading activities are either a core element of their charitable activities or an important source of funding.

What’s in the guide?

OSCR’s Charities and Trading Guide is aimed primarily at charity trustees with information on:

  • The different types of charity trading.
  • The use of a trading subsidiary.
  • The duties of charity trustees in relation to trading.

While providing useful introductory information, the guide recommends that charities seek professional advice before starting any trading activity.

The guide identifies three categories of trading and summarises the tax and charity law implications of each:

  • Primary purpose trading: where the trading activity directly contributes to a charity achieving its purposes, for example, a theatre charity selling tickets for its productions.
  • Ancillary trading: where trading does not directly advance a charitable purpose but contributes to its success, for example, a college selling stationery or textbooks to its students.
  • Non-primary purpose trading: where trading is carried out to raise funds for a charity but is not a charitable activity itself.

While UK tax law applies to a charity’s trading activities, OSCR, in the course of exercising its functions, may take a view on whether an activity advances a charity’s purposes.

The potential advantages and disadvantages of establishing a trading subsidiary are discussed along with the key issues and risks to be considered when managing the relationship between a charity and a trading subsidiary.

OSCR reminds trustees of their general duties as set out in the Charities and Trustee Investment (Scotland) Act 2005 to act in the best interests of their charity and emphasises that trustees must also be clear about the benefits that trading or setting up a trading subsidiary is expected to bring.

Other guidance on charities and trading

The guide is a useful summary for ICAS members who are trustees or who act for Scottish charities.  However, reference should also be made to the following HMRC guidance:

The HMRC guidance states that “Your charity is trading if it sells goods or service to customers” and goes on to cross-refer to guidance issued by the Charity Commission for England and Wales on Trustees Trading and Tax: how charities may lawfully trade (CC35).

While Scottish charity law provides an overlay to the trading activities of Scottish charities, it is UK tax law which applies. Therefore, the guidance in CC35 may also be helpful to Scottish charities and their advisers.


  • Charities
  • Tax

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