Many Academy Trusts carry out activities that go beyond educating their pupils.
When an Academy Trust is set up, it sets out its charitable objects and in the main these will include advancing education and recreation for the benefit of local people. All profits generated from trading within these objects are exempt from corporation tax. (If you have not included a recreational object in your Trust, it can be added with the consent of the Charity Commission, and the EFA.)
Where less than £50,000 of turnover is generated from activities outside these objects (non primary purpose trading) and the academy receives more than £200,000 in funding, the academy can benefit from a “small scale exemption” from tax.
If however, turnover in excess of £50,000 is generated by non-primary purpose trading a trading subsidiary company is likely to be required. The profits from the subsidiary can be transferred tax efficiently through the Gift Aid scheme and potentially both the trust and the subsidiary are kept below the VAT threshold.
The subsidiary should be wholly owned by the academy trust, have at least one director who is not an employee or governor of the trust and have a contract in place for the use of trust services/facilities.
If your academy has significant income from facilities and services (greater than £50,000) derived from trading outside your primary objects, either a change to your objects or a trading subsidiary may be required.
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