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Charitable Trading Companies

What is a charitable trading company (CTC)?
Does my charity need a trading company?
Our services and the incorporation process


A charitable trading company (CTC) is a company which is set up to trade on behalf of a charity, as a means of raising funds for that charity. The main reason for needing such a company is the general rule that a charity may not undertake trading except as an incidental part of its main activity. Usually, the trading company will be limited by shares and all shares will be owned by the charity. (There is, however, nothing to prevent a charitable trading company from being limited by guarantee, with the charity as its sole member.) In either case the articles of association must provide that the charity has complete control over the CTC and the way in which it is run.

For example, if the company is limited by shares, then the articles will state that no further shares may be issued and no shares transferred without the consent of the charity. This means that other parties will not be able to buy shares in the CTC, so cannot take control of the trading company away from the charity. The charity will also be in control of the appointment and removal of directors.


Charitable trading companies are very common, especially where the parent charity is a large concern or relies heavily on retail or other types of trading to generate income. A well-known example of this in practice is the charity Oxfam, which operates a trading company as a means of running its shops.

There are many rules set down by the Charities Act 2006, the Charity Commission and HMRC which govern whether or not a charity must set up a separate company to deal with the trading it wishes to carry out. However, the simplest way to work out whether a charity needs to form a trading company is to consider the nature of the trading activities which are to be undertaken, the scale of such activities and whether they fall into one of the 'allowed' categories of charitable trading. (Advice on whether this is the case or not can be sought from HMRC.)

In general, charities are free to carry on trading activities which contribute directly to the furtherance of their charitable objects (this is called 'primary purpose trading', and an example of this is a charity providing residential accommodation in the course of running a care home). Charities can also trade on a basis which is merely incidental to its objects ('ancillary trading' - e.g. running a bar in a social club). Where the purpose of trading is to raise funds for the charity, then it can carry on such activities without a trading company, provided that the trading itself does not involve significant risk.

Any trading which falls without these parameters is likely to require the formation of a trading company in order for it to comply with the law.

Charitable trading companies are subject to Corporation Tax in the same manner as any other trading company. However, depending on the circumstances, they may also qualify for tax breaks which are unavailable to 'normal' trading companies, such as Gift Aid. More information can be found on the HMRC website. Please note that we cannot give tax advice.


We have extensive experience of helping clients to set up charitable trading companies, and are able to advise on the law surrounding their registration and operation. For further details or to receive a quote, please do not hesitate to contact us.


HMRC charity guidance pages
The Charity Commission trading guidance pages


Charitable companies
Companies limited by shares
Charity legislation
The Companies Act 2006

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