Not for Profit Structures

These are like “normal” companies except that these have “CIC” after their name rather than “Limited”. They can be set up as companies limited by shares or guarantee.

CICs have provisions in their governing document putting a limit on the distribution of profits or payment of salaries or distribution of assets on a winding up.

They do not have any special tax reliefs and will pay tax on their profits like “normal” limited companies.

Accounts will be similar to those for normal limited companies.

They are regulated by a special “CIC Registrar” (The Office of the Regulator of Community Interest Companies) and will deliver a report to the Registrar each year when they file their accounts (CIC34).

The benefit of a CIC is a kind of “kitemark” identifying the organisation as providing a public benefit and limiting or prohibiting the extraction of profits.

Companies Limited by Guarantee are a suitable vehicle to run a NFP entity rather than a separate category of entity. They are similar to “normal” companies except that the members do not have shares but instead provide a “guarantee” to contribute to the company on winding-up, and they are prohibited from distributing profits. This makes them a suitable vehicle for registered charities or CASCs as well as other not-for-profit entities such as trade associations, sport governing bodies, etc. as these provide a corporate structure and the limited liability protection of a company. This is also helpful for a number of VAT Reliefs which depend on a prohibition from distributing profits.

The taxable status will depend on the status of the company. Those registered as charities will be eligible for charitable tax reliefs, but otherwise these will be subject to the normal corporation tax rules.

Charitable Companies Limited by Guarantee must always prepare full accruals accounts in compliance with the Charities SORP.

Companies Limited by Guarantee can be exempt from the need to include “Limited” in their company name in certain circumstances.

As the title suggests, these are sports clubs for amateur participants. Subject to fulfilling a number of criteria, mainly in relation to accessibility, the CASC can register with HMRC and will receive a number of tax reliefs and the ability to obtain Gift Aid refunds.  The CASC will also get Business Rates Relief.

CASCs need to prepare Corporation Tax returns and income from non-members may be subject to tax depending on the circumstances.

CASCs can be set up as unincorporated associations or Companies Limited by Guarantee.

Detailed guidance on the criteria for registration and other matters can be found here:-

These are a relatively new form of organisation. These are specifically set up as vehicles for registered charities and the regulator is either CCEW for England and Wales or OSCR for Scotland. It is not possible yet to set these up in Northern Ireland.

They combine the advantages of a company (mainly limited liability, but also separate legal personality which gives the ability to hold property in its own name) with the flexibility of unincorporated trust or association. There are no filing requirements at Companies House, and CCEW or OSCR are the only regulators.

They are subject to same accounting rules as unincorporated charities so subject to normal thresholds can prepare Receipts & Payments accounts rather than full charity SORP accounts. They are also subject to the same external scrutiny rules as other charities (Independent Examination and audits).

They will however always be required to file accounts with the regulator even if income is below normal thresholds.

These can also be used as vehicles for regulated charities.

Where the charity is a membership body an Association will be best but otherwise a Trust will suffice.

The main differences from CIOs and companies are as follows:-

• Trustees or members do not have limited liability so if the entity becomes insolvent the debts become those of the trustees or members.
• The entity does not have separate legal personality and cannot own property in its own name.  This will instead need to be registered in the name of the Trustees (and will need to be re-registered if Trustees change) or use a corporate custodian trustee.

Because of these issues if the entity is doing anything that could pose a potential financial risk, such as employing staff or trading, or it owns property, it is best using an incorporated structure such as a company or CIO to simplify administration and protect the trustees.

This covers a whole list of other not for profit entities previously registered as “Industrial and Provident Societies” and examples we have seen include registered social landlords, housing associations, alms houses, British Legion clubs or employers’ associations. This is also a suitable vehicle for co-operative societies etc.

These are registered with and regulated by the Financial Conduct Authority (FCA). The members can have shares and are protected by limited liability and use “Limited” in their name but are not limited companies!

These entities can carry out trading activities, but the aim is not to make profits to pay dividends etc. but either to act as co-operatives or trade for community rather than personal benefit. This will be policed by the FCA.

Some entities could also qualify as Charities but the FCA will act as primary regulator and CCEW will only become involved if requested by the FCA.

They are subject to normal corporation tax rules subject to some modifications.

This is just a quick overview to try and de-mystify some of the terminology.  Before setting up an entity advice should be taken to choose the most appropriate structure and to understand exactly the reporting and tax status.

The Charity Commission also provides useful template Governing Documents to assist once you have selected your structure.

If you are setting up a charity, Click here to find useful guidance of the different vehicles that can be used