Question: Does A Community Interest Company Pay VAT?

What is the benefit of a community interest company?

A community interest company (or CIC) is a special form of non-charitable limited company, which exists primarily to benefit a community or with a view to pursuing a social purpose, rather than to make a profit for shareholders..

Does a CIC pay tax?

Unlike a charity, a CIC is not entitled to any specific corporation tax exemptions. Accordingly, a CIC’s profits are fully taxable unless it can be shown that the terms of the contract are such that, in tax law, the organisation does not amount to a taxable trade.

Can a CIC reclaim VAT?

CIC status does not automatically equal VAT Exemption. You might still achieve VAT exemption, but this is subject to satisfying specific set of rules. It’s worth mentioning that when the CIC reaches the VAT Threshold, you need to make an application to get the VAT exemption.

Can a CIC pay its directors?

A major advantage of CICs is that their directors can be paid a salary, which means that the founders of the CIC can retain strategic control of the enterprise by sitting on the board as paid directors.

Can a CIC accept donations?

A CIC will typically not be dependent on donations and fundraising as it will have a mix of income including contracts, trading income and grants. Whereas a charity is more likely to be dependent on grants, donations and fundraising for a larger proportion of its income.

Can a CIC own property?

The CIC or charity can own property, and rent space to the other. … The charity would be eligible for a lot more trusts and foundations that only give grants to registered charities, as well as being eligible for gift aid on donations.

Can a CIC make profit?

There is no limit to the level of profit a CIC is allowed to make as this profit will be used to benefit the community it was set up to serve. … There are no tax advantages so regulation is light touch, a balance of minimal regulation whilst maintaining confidence in the “CIC” brand.

Can a CIC pay directors?

CIC Directors may be paid for their services. … However, many CICs will be actively trading businesses that need good directors if they are to be successful. Such CICs will usually need or wish to remunerate their directors in order to ensure that they achieve their full potential to benefit the community.

How much does it cost to set up a CIC?

Enabling you to register your company name with Companies House, register with HMRC for Corporation Tax and gain approval from the CIC Regulator to form a CIC , all at the same time. The filing fee for an online incorporation for a CIC is £27 and is payable by card or PayPal.

Does CIC have to register with Charity Commission?

CICs are not charities and are regulated by the Regulator for Community Interest Companies (RCIC), not the Commission. … This charitable trust must be registered, if it meets the minimum requirements. A charitable company that has converted to a CIC must be removed from the Register as it is no longer a charity.

Is CIC VAT exempt?

This means the grant and services for the CIC or Charity are an exempt supply and will not count towards the £85,000 threshold, therefore there is no requirement to register for VAT.

Are donations to a community interest company tax deductible?

CICs are taxed in the same way as normal companies. They are subject to corporation tax and VAT and a CIC that makes donations to charity can deduct this as a charge when calculating its profit for corporation tax purposes.

What is the difference between a social enterprise and a community interest company?

The phrase social enterprise refers to the way in which you operate and run your business or organisation. … Social enterprise and being a social enterprise isn’t specific to a particular legal structure. A CIC is a particular legal structure – one of many different legal structures that a social enterprise could choose.

Is a CIC a non profit?

As a hybrid corporate vehicle, CICs combine certain characteristics of for-profit businesses with the social purpose nature of non-profit entities. Under the CICA, CICs, like any other business corporation, are permitted to engage in their activities with a profit motive and are established with share capital.

Can community interest companies accept donations?

Yes, social enterprises can accept donations. Their treatment depends on the legal structure the social enterprise has and where the donations came from (individuals or businesses) and whether the donation is money, services, goods or other items.

How does a community interest company work?

A community interest company is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or the community, rather than being driven by the need to maximize profit for shareholders and owners.

Does a CIC have shareholders?

A CIC is a special type of limited company which exists to benefit the community rather than private shareholders.