Hi - I belong to a small group that has been collecting, archiving and publishing oral history interviews for more than 30 years as a membership organisation. In 2009 we registered as a CIC in order to be able to apply for funding from the Heritage Lottery Fund, etc. and pay Directors for working on projects. We have a tiny income and the time required to produce annual reports has been hugely disproportionate to the volume of our work and very stressful. Every accountant we approach seems to have a different view of how we should present our accounts and about the tax obligations of Directors. Becoming a Charitable Incorporated Organisation might suit us better, but from the Charity Commission's website it looks as if CIOs are still in limbo. I would be very grateful to know what you think are the advantages and disadvantages of the CIO structure and if you have any idea about the timescale for its introduction.
For England the plan currently is later this year, but there have been many false dawns so its best to wait for further announcements.
If you are running a tiny income its odd to hear you say it is a lot of work, basic accounts plus the annual statement (CIC 34), have a look through some of the previous discussions on simplifying tax reporting which might be relevant to you.
Issues like paying a salary to Directors are certainly issues to consider, if you put up some more info on what the issues with your accounts have been some members may be able to help.
Hi John. Thank you for your reply. We have spent a lot of time on reports because we have had conflicting advice from different accountants and do not feel confident about making the right decision. Hence long, circular discussions.
One issue is how to classify grants for specific purposes that continue beyond the end of a financial year. Should this be recorded as profit? We have also had varying advice on the tax position of Directors working for the CIC. The work is usually recording, editing and transcribing oral history interviews and managing projects - the CIC’s core activity. Payment usually comes from grant funding. (We do not pay Directors a salary). Looking at answers to an earlier question it seems that it is possible for this work to be done by Directors on a self-employed basis. But is there a point where this type of work could shade into ‘running the company’?
If the Grant is in fact payment under a contract for something you will do, then you should carry it forward as Deferred Revenue and recognise that income next year.
If the Grant is a genuine Grant (a freebie with no obligation to provide anything, even though it was perhaps given to assist with a specific project) then it should probably be recognised now and will be a profit.
Directors could do the recording, editing and transcribing on a Self-Employed basis *IF* they are also selling similar services to other parties and are invoicing for all of them. Are they genuinely in business doing this in their own right?
If they only do this work for your CIC, then I'm afraid it will probably be Employment income.
Thank you for this very helpful reply. I am beginning to make sense of it all.
A quick contact with Heidi should help you: http://cicassoc.ning.com/profile/HeidiHarris
I know you can carry forward unused grant into the next year without paying tax as profit in circumstances, Heidi will be able to help on that.
Ive tried to get an update on CIO's. There was recently news that they would be looking to bring it into effect later this year, on closer inspection it looks like it is just as likely not to happen. This is only grapevine opinion, but lack of cash seems to be the main reason.