CIC Association

Serving Community Enterprise

A social entrepreneur, Dr Syed Nayyer Abidi of Manchester, calling on PM & all politicians to free social enterprises from paying tax on their profits, if they promise to use the cash for future community use. Dr Abidi, founder director of a social entreprise in Health & Social care, CHIEF, raised questions over the fairness of forcing social enterprises to pay tax (CT) on profits that tax will cut down their ability to deliver social benefits. Although tax can be avoided through setting up a charity, this brings with it added costs, management issues and extra hassle.

If you agree with me, please click over the this hyperlink: http://petitions.number10.gov.uk/taxfreeprofits/ and sign the e-petition. Thank you.

Regards,

Dr Syed Abidi
www.chiefcic.com

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Syed,

Allow me to offer another suggestion. We are not a CIC largely because the kind of activism we participate in would be outside the rules of CICs.

Some months ago, I posted a suggestion as a contribution to the social enterprise summit. It was to offer tax relief to investors in social purpose rather than the operation itself. It was removed and I believed served up by someone else at the summit but I caught a copy in Google cache.

http://www.box.net/shared/ckzbep5h26

Operating as a small business, we contribute to the economy in the traditional way but over and above is the investment in social purpose. One of our outputs was a strategy plan for leveraging social enterprise and in this we describe a social investment fund mechanism in which goverment will lay down 1.5 billion dollars and socially responsible business persuaded to augment the fund with addtional contribution. The incentive for making such investment other than the social ROI could be tax relief for the investor.

http://www.p-ced.com/projects/ukraine/national/

This in the wake of the credit crisis offers an investment opportunity which should exceed the current low rates of return in the private sector where only low interest rates have recently been on offer.

The social outcome BTW, could be measured as proposed by the concept of a social impact commitment, which is something I can demonstrate from recent news.

http://www.free-press-release.com/news-the-homeless-humanitarian-an...

Regards,

Jeff
Why should CIC's not pay tax ?

Why is it socially acceptable for a social enterprise to avoid paying tax by setting up a charity when it is not socially acceptable for an investment bank to avoid paying tax by setting up complex overseas structures? Would it be socially acceptable for a community-wind wind farm to avoid paying tax? Would it be socially acceptable for a plc energy producing wind farm (Ecotricity perhaps) to avoid paying tax? What if that plc was owned by pension schemes which need the income generated to provide a decent standard of living to their pensioners?

You mention that you will use this profit for social aims - Are you really so sure that you can make better social use of the profit than the government can?

Social enterprises clearly have regard for their social impact, most attempt to minimise their impact on the planet. Are we so arrogant to assume we have no detrimental impact? Social enterprises also rely on the same national infrastructure (transport, relatively stable political environment, well-defined law etc) as every other business, why should they not contribute towards it?
If the CIC makes a profit that profit should be used for the benefit of the community. So in one way you could say a CIC pays 100% on its profits. Which way it pays it is really what we are say. Should the CIC be allowed to keep what would normally be paid in taxes to government on profit so it can choise how that money is spent.

Personaly I would like to spend all our profits on helping our target groups in the coumnity that has generated those profits (of course we have jet to even start anytrading as we where only registered on 18th/6/2010).

I do wonder if in fact a CIC can make a taxable profit as such, if it is paying tax then maybe it needs to look at the money its earning and how it is spending it and weather it should be putting more of it back into the comunity in some way.

I guess some CIC's have to make a taxable profit to pay a dividend to the share holders. Again they shuld be able to limit that tax with carefull management.

Maybe I see things to simplisticly and I am sure things could happen which could turn a small profit into a large one in the last qtr or even month. The last business I ran before my acident in 2000, I pay minimual business tax on as I put a lot back into comunity events then, which meant I paid tax on my 'wages' with very little tax outside of that.

Steve
Hi Steve, welcome to the site.

A business (including CICs) should always aim to make profit on which it pays tax - as it will need reserves for a rainy day (or the storm of the next 5 years of the emergency budget). A common problem experienced by the trading subsidiaries of charities is that they donate all their profits and end up with nothing under the mattress for when the rain comes.

Long Term Business first, community second. Always.
A Good point but as we don't have a mattress yet let alone any tax paid profit to put under it I shall have to store that on up for latter.

Of course CIC's like any other enerprise needs to hace reservers and so some Tax is going to be paid. Even so I still tink with carefull managment you should be able to limit the tax paid via business taxes and maxamise the amout of your funds stays locally.

it is a balacing act which needs to be carefully managed. As for weather or not we should pay business taxes as I said the whole ethous of a CIC is to be giving to the comunity and therefore there is a sense that CIC pay 100% (less an put to recerve of course) tax on its profits. The only issue as far as I see is wether we should pay the money to central government or keep it locally.
I agree.

At the moment a company usually gets a deduction from its taxable profits for any donations to charity.

I think it would be much more powerful if the company got a deduction from its tax liability for any donations made to charity.

This would circumvent the circular nature of a social enterprise making profit, passing it to central Government, who skim off 99%, 1% ends up with the local council who skim off another 99% leaving tuppence to spend on the social ills that the original social enterprise is combatting in the first place.

Its not rocket science, is it!?
Maybe it shuld be rocket science!!

Rocket Science is very simple, stick the right amout of combustable fuel under a long skiny round tower and light blue touch paper.

On a more serious note 99% skimed of by Central Government, how do you get to just 99%?

Your right of course by time you have paid all the taxes there is not much left to spend localy.

Stii the 1% of 1% is better then 0%

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