Academy trust trading companies: time for a compliance health check?
Trading companies can provide valuable income for academy trusts, but they also bring regulatory responsibilities. With increasing scrutiny from the Department for Education and Charity Commission, now is a good time to review whether your arrangements are fully compliant. We highlight common risks and explain how a targeted legal review can help ensure your trust’s trading activities are robust, legal, and well-governed.
Many schools and trusts are at the heart of their communities and, as such, often engage in activities beyond the core running of schools. These activities may arise for a variety of reasons, including:
- Raising additional income to support the trust or its schools.
- Meeting contractual obligations (e.g. providing access to leisure facilities outside school hours).
- Filling gaps in local provision, such as running a children's centre or offering adult learning for parents.
We regularly see trusts involved in a wide range of trading activities - from the operation of leisure facilities and private nurseries, to managing lettings and running training programmes. In scenarios where trading which would be classified as 'non primary purpose trading' and turnover is above a specified level, the trading necessarily needs to be hived down to a trading subsidiary to avoid exposing the trust to tax. In other scenarios, we see certain types of trading moved to a subsidiary as part of a risk management arrangement.
In our experience, especially where arrangements have been inherited from converting schools or transferring academies, there's room for improvement when it comes to governance and documentation.
If your trust operates a trading company, here are some key questions to consider:
- Are your trading activities clearly separated from your charitable operations?
- Is your trading company set up and managed in a way that complies with charity law on non-charitable trading and profit distribution?
- Is the relationship between the trust and the trading company properly documented (e.g. service agreements, leases / licences, staff sharing)?
- Are conflicts of interest identified and managed in accordance with the Academy Trust Handbook and charity law?
- Is your trading company filing correct and timely accounts — and are these being actively reviewed by the trust’s board?
- Have trustees received appropriate advice and training on their responsibilities in relation to trading activities?
- Have any transactions between the trust and its trading company been subject to an independent review or audit?
- Are your arrangements aligned with the latest DfE guidance and expectations?
If you're unsure about any of the above, now is a good time to take stock. We offer tailored legal reviews of academy trust trading arrangements - helping you identify risks, strengthen governance, and ensure full regulatory compliance.