Charity Finance Directors' Group delighted at recommendation to relax laws on charities' trading

30th September 2004

The Charity Finance Directors' Group today reacted with delight at the report from the Joint Committee on the draft Charities Bill, and recommendations by the committee to relax the laws on charity trading.

CFDG Deputy Chairman Helen Verney, who gave evidence to the committee, said, "We are pleased with the Committee's recommendations. We are now presented with a valuable opportunity to reduce a regulatory burden that is unnecessary and wasting the precious resources of many charities. We look forward to positive discussions with the government that will hopefully lead to a useful increase in the de minimis limit on non-primary purpose trading.

We are glad that the committee recognised the points put forward by CFDG on the issue of competition with small businesses. The reality has always been that charities that want to trade already do so through a subsidiary and avoid paying tax by transferring profits to the charity. We look forward to seeing the Charities Act 2005 and we will continue our campaign to simplify the confusing and difficult interpretations by the tax authorities on the issue of sponsorship and similar income generation.

Although disappointed that the original proposals, to allow trading within the charity that were supported by the Cabinet Office in Private Action, Public Benefit, will not be reintroduced to the Bill, CFDG believes that the new recommendations on trading should save many charities time and money.

Although the committee considered CFDG proposals to allow charities to conduct sponsorship activities without having to go through the hoops and loops of using a trading subsidiary there is no substantive change proposed that would relieve treatment of sponsorship as a trade. We will be continuing with this campaign and are looking forward to negotiations with the Inland Revenue.

CFDG are happy that the bill could include a statutory provision for group accounts and welcomes the relaxation of the rules allowing the spending of endowments. We now hope that the Bill will be included in the Queen's speech in November, and are looking forward to the long-overdue modernisation of charity law and regulation.

Notes to Editor:

1. The Charity Finance Directors' Group was set up in 1987 and is an umbrella group that specialises in helping charities to manage their finance-related functions.

2. CFDG's 1000 plus members are responsible for the finances of charities with a wide variety of income levels. Over 60% of the top 500 charities are members of the CFDG. Between them our members manage some £10 Billion in charity income per year.

3. CFDG argued in their oral and written submissions to the joint committee on the draft Charities Bill that charities should be allowed to conduct trading within the charity subject to a duty of care, in line with the original proposals in Private Action, Public Benefit.

4. CFDG also argued that, if there is no change on the government's position regarding the need to use trading companies, serious consideration should be given to allowing donations, which are presently treated as taxable sponsorship to go through the charity without having to set up a trading company to receive what is in substance a donation.

5. The report from the draft committee recommends that, "the draft bill should be amended to allow charities to trade within the charity and enjoy tax exemption on trading income up to the point where income from trading equals 25% (or £5000 if the greater) of the charity's total turnover, but this should be subject to an overall limit higher than the current £50,000 and the Government should consult on the level at which that overall limit should be set. (Paragraph 354)"


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