NCVO and Social Enterprise UK
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Tax

An obvious source of finance for any enterprise is retention of profits. If your organisation is likely to be very dependent on its surpluses, perhaps because you are not able to access other forms of finance, then it is worth considering the tax implications of choosing certain legal forms. In particular, a wide variety of tax liabilities can be avoided or reduced through adopting charitable status.

For some social enterprises the mutuality principle is also extremely important. This provides that where profits are derived from mutual trading between members of an organisation, those profits are not subject to tax. This role would apply for example, to a sports club bar open to members of the club only. It would apply to co-operative organisations if they trade only among their members but not if they sold goods and services to the general public. For more information go to www.hmrc.gov.uk