Can parish councils do things for profit without setting up a company?

Question

Upon looking at  the Localism Act 2011 it seemed evident to me that parish councils aren't allowed to do anything for profit('commercial purposes') with out doing it through a 'company' that it sets up. Is this correct?

Is this relevant even when only small amounts are involved? For example the councils stalls at markets and fayres etc?

Also does this have any implications to endeavours which aren't budgeted to make a profit but end up making a substantial profit?

Answer 1

You've struck a tricky topic here!  I can't claim to be authoritative, but my reading of the situation (including the new provisions in the Localism Act) is that a council is required to set up a company where it is embarking on a commercial enterprise.

My impression is that the acid test is not whether a profit is made, or may be made, but whether the council is engaging in the activity from purely commercial motives.

In other cases, such as when a council is trying to offset the cost of a service, then it appears that the obligation to set up a company does not apply.  Clearly there is a fuzzy boundary here, but it seems unlikely that a council would be taken to task over small sums or windfall profits.

Comments

Thanks for your answer.

I've now done even more research and what I have found is that it does seem to be all about profit.

In a document on this act written by a barrister 'Commercial purpose is not defined in the Bill. However, it will clearly include carrying out an
activity with a view to profit'. I also found a councils monitoring officers saying the same sort of thing.

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Yes, I think what you quote from the barrister is pretty similar to my original answer.  The barrister's remark refers to "with a view to profit", which I wouldn't take as meaning the same as any activity that may happen to create a profit.  It is the intention to seek a profit that counts - that is what I meant by "purely commercial motives".

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Thanks for your help!

This part of the localism act was put to the council in relation to an event that is being organised by the council which is budgeted to have an income 8k higher that expenditure.

Other councilors responded by saying that they won't call it profit but instead call it surplus and that its not profit is is being spent elsewhere in the councils overall annual budget. This really doesn't sound ok to me as the act seems to relate to the provision of individual things.

Unfortunately our clerk wasn't at this meeting and hasn't responded to my recent request for advice yet. Any thoughts?   
Thanks.