The Institute of Chartered Accountants in England and Wales Releases Guidance on Donations to a Charity From its Trading Subsidiary

The ICAEW’s guidance clarifies that a trading subsidiary is not permitted to pay its parent charity a greater sum in Gift Aid than it has profits for its accounting purposes in each year.

It is understood that a charity will be liable to repay any payment made to it from its trading subsidiary in excess of its profits over the last six years. We are awaiting clarification from HMRC as to whether it will only demand this repayment if the distribution to the charity was made dishonestly.