CIC Association

Serving Community Enterprise

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.  

  1. Is the Grant results-based?
    1. If the Grant is a set size regardless of what you actually achieve with your project, you are probably not trading.
    2. If you get £50/practice job interview held (for example), you're more likely to be trading as you are closer to providing a service (even though the customer is different to the consumer of the service)
  2. Does the project have a profit motive?
    1. If you get a Grant to put on a community music event, which is free and after some sponsorship you just about break even, this is probably not trading.
    2. If you get a Grant to hold a concert which could be viewed as a mini-Glastonbury (and is heavily promoted etc) you're probably trading.
  3. Does this Project have enough of the badges of trade to constitute trading?
    1. Summary here
    2. Essentially, are you operating like a business? Do you advertise etc?

 

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 :)

Views: 823

Replies to This Discussion

Hi all

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?

Regards  Paul

Paul
If it is legitimately Deferred Revenue then; No it should not go on the CT600 as revenue. This number should be identical to what is in the stat accounts.
Alastair

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! :)

Paul

RSS

Groups

From Funding Central

Events

© 2018   Created by John Mulkerrin.   Powered by

Badges  |  Report an Issue  |  Terms of Service