not necessarily. Its complex. Some general principles:-
A Grant will start out life as being a taxable receipt of a CIC. Unless you can think of a clever wheeze it will remain taxable. This is the automatic position.
(Non-Taxable Grants are possible, however these would be clearly marked as such by the Grant giving body and I would expect the Grant giving body to be a Government dept or acting for one. A Non-Taxable Grant is unlikely.)
A Grant received for the general running of your CIC will be taxable. This will form part of your income and there is little you can do about this.
A Grant received for a specific project could be non-taxable. The big question is whether or not this activity is a trading activity, as a trading activity is a taxable activity.
You are able to split out your trading from your non-trading activities in your tax return, however the big question is whether you would want to. Generally speaking, the non-trading activities are likely to be loss-making. If you disclose them as non-trading activities, you get no tax relief for those costs/losses.
Whether a Grant is taxable is a quite seperate issue from when the Grant is recognised in the accounts. Officially the matching principle no longer applies to accounts, however allocating a Grant to deferred income until such time as the expenditure is incurred seems a lot more reasonable to me than; including the income in the P&L for the period but claiming it being non-taxable on the grounds that it is designated funds for a later period's specific project.
I do not believe that Charity-type Designated Funds rules can apply to a CIC. CICs are not charities, they are thus bound by normal company accounting rules and (broadly) such income should be held as a Deferred Income creditor pre-PBT rather than a Reserve post-PBT.
Happy New Year :)
I am a retired public sector accountant, NHS background largely but some other sectors too.
I have a pro-bono CIC client whose first accounts I have prepared and whose first CT600s are due soon.
I have taken the excellent advice above and taken some of Year 1 grant income to the balance sheet ready to match with the expenses in Year 2. Q1: does that deferred income form part of Turnover for CT600 purposes?
Thanks Alastair I believe its deferred: it was a start-up grant to fund programme marketing and not all of this spend was finished inside the 1st accounting period - it was all spent in the next 4 months. It would seem extremely unreasonable to pay CT on the balance of unspent grant (and I am a former Collector of Taxes so you can quote me! :)