There is also an exemption from tax on trading activities where ‘the work in connection with the trade is mainly carried out by beneficiaries’. It is not envisaged that charities would generally have to rely on this narrow exemption, since a trading activity that falls under this provision would also usually be a primary-purpose trading activity. However, the exemption does cater for the possibility that where the work is mainly carried out by beneficiaries the activity need not be of a primary-purpose nature.

The common examples of ‘beneficiary trades’ include students at a catering college operating a college restaurant or an agricultural college where the students might operate a farm shop. The legislation also recognises that a charity’s beneficiaries may not be able to undertake a trading activity in their own right and therefore the exemption will still apply provided it can be shown that the greater part of the trade is carried out by the beneficiaries.

If the beneficiaries are paid as employees working in a primary purpose trade, the exemption will still be available.