[cma-l] Charitable Status

[Two Lochs Radio]

Your first paragraph seems to me exactly sum up why a company limited by guarantee (CLG) is a simpler solution, to sand to considerably misrepresent the positions re CLGs, CT & VAT.

A CLG, just like a regular limited company: 
-is a fully incorporated company under the Companies Act
-is run by a board of directors under Articles and Memoranda
-can freely undertake commercial trade

 But unlike an ordinary limited company, a CLG:
-does not have shareholders who have ownership rights or can take a profit 
-can choose not to have 'Limited' in its name if appropriate
-is not permitted to distribute profits to others, but can make as much surplus on trading activities as it likes for its own unrestricted use
-is not liable for Corp Tax (except sched D bank interest)
-can register for VAT, and reclaim input tax

In addition quite many companies, government departments, grant funders and support agencies treat them the same as charities.

In short, a CLG seems perfect for our purposes. Which is presumably why that is how most of us are constituted. 

And as you suggest, a separate charity can be established if there is sufficient additional advantage for the extra effort and regulatory oversight.

It is a fallacy to think a body must be profit-making to register for VAT. 

'Trading' or carrying on a business is not synonymous with 'profit making', and making a 'profit' for the benefit of shareholders (taxable) is not the same as making a 'surplus' for the benefit of the company limited by guarantee (not taxable). 

The key point is that what HMRC considers as trading for VAT purposes does not have exactly the same criteria as it has for liability to corporation tax. 

I'm not sure you have identified a single advantage to the CIC, but you have suggested the disadvantage that HMRC don't like letting them register for VAT. 

What am I missing here?

Alex

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