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<DIV><FONT size=3 face=Calibri>As Ian and others have said, you need to check
out the pros and cons of this and be sure you will get sufficient benefit from
nbeing a charity.</FONT></DIV>
<DIV><FONT size=3></FONT> </DIV>
<DIV><FONT size=3>However, I'm not sure I'd agreed with the suggestion that a
CIC is the most flexible. I would say (for non-profits) a CLG is the most
flexible, and charity the most restricted, with a CIC somewhere in between. In
particular, a charitiy's trustees may not also be employees of the charity,
whereas a CLG's directors can be. </FONT></DIV>
<DIV><FONT size=3></FONT> </DIV>
<DIV><FONT size=3>A CIC is normally also a CLG (or regular profit making limited
company). A CLG may be registered as a charity as long as it's objectives are
accepted as charitable. The constitution of a CLG may also provide for 'lock-in'
of assets - indeed they almost always do. The CIC structure was mainly
introduced to ease some practical problems for provident associations I believe,
not for any perceived difficulties of CLGs being charities.</FONT></DIV>
<DIV><FONT size=3></FONT> </DIV>
<DIV><FONT size=3>I agree entirely that almost any Community Radio operation
that is not entirely grant/donation funded is likely to benefit from VAT
registration, especially in the start up phase. and there are two things to note
that are often overlooked or misunderstood.</FONT></DIV>
<DIV><FONT size=3></FONT> </DIV>
<DIV><FONT size=3>There is nothing to stop a charity from registering from VAT
as long as it is carrying out <EM>some</EM> business activities. Do not confuse
'business activies' for VAT purposes with 'profit making' - it is perfectly
normal and proper to be carrying out business activities in VAT terms while not
making a profit (and not being liable therefore for Corporation
Tax). However there are rules about how much trading a charity can do, and
usually it must not become a large proportion if its acitvity.</FONT></DIV>
<DIV><FONT size=3></FONT> </DIV>
<DIV><FONT size=3>For VAT purposes, business is simply defined as providing
goods and/or services within the scope of VAT in return for payment, whethe ror
not that actually leads to eventual profit. Receipt of grants or donations is
not withoin the scope of VAT. So for example it would be quite proper and normal
for a CLG registered as a charity to derive, say, 20% of it's turnover from
business activities and to register for VAT, and therefore be able to reclaim
VAT on its purchases.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3>The main downside is that VAT must also be charged on business
invoices which makes your services dearer if you are supplying to end consumers,
but most CRs would be supplying services to other VAT registered businesses who
would not be affected. Fundraising events can be declared 'outside the scope of
VAT' with nothing reclaimed from their costs and nothing charged to their
participants (eg no VAT on tickets), so these can be unaffected by VAT
reg.</FONT></DIV>
<DIV><FONT size=3 face=Calibri></FONT> </DIV>
<DIV><FONT size=3>We have looked at possibly registering a
charity several times, but have each time come to the conclusion that the
benefits of being able to apply for funding to a wider range of bodies was not
worth the disadvantages of additional restrictions and governance, but we get
well over 50% of our income from trading. For a CR not abloe to take or
get commercial advertising the balance may be very different. As Ian says, a
common and possibly beneficial arrangement is to have two seaparate entities,
one of of which charitable and one of which is business, and use the latter to
fund the former. However the former then may have more difficulty registering or
reclaiming VAT on purchases unless it also carries out some business
activities.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3>But in either case registering for VAT is a separate question,
and for us has definitely been beneficial.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3>Alex</FONT> </DIV>
<BLOCKQUOTE
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dir=ltr>
<DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV
style="FONT: 10pt arial; BACKGROUND: #e4e4e4; font-color: black"><B>From:</B>
<A title=transplanfm@hotmail.com href="mailto:transplanfm@hotmail.com">Ian
Hickling</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A title=tlr@gairloch.co.uk
href="mailto:tlr@gairloch.co.uk">tlr</A> ; <A title=cma-l@commedia.org.uk
href="mailto:cma-l@commedia.org.uk">cma-l</A> ; <A
title=clairepenketh@yahoo.co.uk href="mailto:clairepenketh@yahoo.co.uk">Clare
Penketh</A> </DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Sunday, September 11, 2011 8:09
PM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> Charity/Limited Company - or
what?</DIV>
<DIV><BR></DIV>
<DIV dir=ltr>
<P>I think the best move it simply to itemise the benefits and
liabilities.<BR>The Licence must be held by a Non-for-Profit organisation,
which can be a Community Interest Company, a Registered Charity or a Company
Limited by Guarantee - and there are two other formats I believe.<BR>A CIC is
the most flexible and an RC is the most restricted.<BR>If you are either of
these, there is nothing at all to stop you having a separate Limited Company
which can operate conventionally and be VAT registered - which I heartily
recommend as vital to any normal trading organisation.<BR>If you have
Charitable Status, it is so much easier to get funding from large
organisations and other Charities, but you won't usually be able to reclaim
VAT on that funding - which will mean you effectively lose 16,6% of everything
you spend.<BR>Not good!<BR>So use the commercial Limited Company to fund the
CIC and look after its tax and debts - and the Charity/Charitable Arm to
source and feed it lumps of direct funding.<BR>One reasonably bright person
can look after all the accounting, which should take no more than two working
days a month.<BR></P></DIV></BLOCKQUOTE></BODY></HTML>