Charities in Scotland often use wholly owned trading subsidiaries to carry out fundraising trading. The net profits from that trading are then passed to the parent charity, which uses them to further its charitable objects. The most efficient method for profit extraction is for the subsidiary to make a corporate Gift Aid donation of its surplus profits to the Charity immediately after each financial year closes. This is a tax-efficient method for both parties as the payment to the Charity is made gross (i.e. without tax deduction) and the trading subsidiary can claim an allowance of that sum against its corporation tax liability.

Trading subsidiaries can be valuable to isolate the Charity from the risks of fundraising trading, to provide a formal management and administration structure for the trading activities, to maximise fundraising opportunities and to develop valuable commercial partnerships for the Charity's benefit. It should be noted that it is not usual for trustees of the Charity to take up remunerated positions on the board of the trading subsidiary, so if this is something which is being considered, then further advice should be sought. If the Charity itself is in a legal form which gives it independent legal identity (eg a charitable company limited by guarantee) then all the issued shares of the subsidiary should be registered in the Charity's own name. Otherwise human nominees will hold the shares under declaration of trust.

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