Holding the Line: Regulatory Challenges in Ireland and England When Business and Charity Collide

Abstract

Developing a legal framework to manage the interactions between the worlds of commerce and charity presents challenges. Should there be situations in which charities can engage in trade in competition with for-profit firms? Should there be limits to the extent of any such involvement? Should the ‘relatedness’ of the business activity to charitable mission act as a mitigating factor? Or, should the ultimate ‘destination’ of the resulting income be the deciding factor in sanctioning charitable trading, regardless of the relatedness of the activity to the charitable mission? Should charity law or tax law control the extent to which the market/charity boundary accommodates incursions by either business or charity in the other sphere? Even to the degree to which such intersectoral activity is tolerated, what should be the financial and structural consequences for entities that engage regularly and substantively in such ‘cross-border’ activities? Prompted by the 2008 Australian High Court decision in Word Investments, this paper reviews the legal framework governing so-called ‘hybrid activity’ in Ireland and the United Kingdom, acknowledging both the difficulties caused by the shifting nature of the boundary line between the business and nonprofit sectors and the challenges inherent in any reformulation of the guiding legal principles. The paper looks at these issues from both a trading and charity law perspective and a trading and tax law perspective before considering how Irish and UK law might have responded differently to the Australian courts in a Word Investments type scenario.