Charities trading - use of retailing websites


Filed Under: AIM-listed

There are a number of websites offering to act as proxy retailers for charities, whereby a proportion or all of the profits generated from the sale are distributed to the charity.

The website operator aims to take the risk away from the charity operating its own shop, as it holds the stock, its systems collect the cash from the customer and its staff operate and maintain the website. In addition, it also allows very small charities to benefit from access to potential new sources of funds, as even small schools and sports clubs can register on these sites. The retailer trades with the charity’s supporters and the profits or a share of them are paid over to the charity via Gift Aid. The retailer earns a share of the profits and the charity receives tax free income as a donation.

There are a number of factors for trustees to consider when deciding whether to register with these sites:

1) Ensure the terms and conditions make it clear that the customer is entering into a transaction with the retailer rather than the charity, otherwise the charity may be required to register for VAT.
2) Ensure the systems are robust enough and that the retailer is financially stable, to ensure funds flow to the charity.
3) Ensure there is a right to audit the income flow to the charity to secure transparency.
4) Determine what happens if the retailer fails; in this instance would the charity still have a right to recover its donations?
5) Ensure the retailer can fulfil their side of the bargain, failure on its part to provide the goods or services will rebound upon the charity’s reputation.
6) Ensure that the retailer is not doing anything which could rebound upon the charity’s reputation such as exploiting labour or polluting the planet.